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The Reserve Bank of Vanuatu

Vanuatu Macroeconomic Developments and Prospects

Department of Research and Statistics

October 2018

Contributions in this booklet is composed of reports collected from onsite visits and interviews compiled by

staff of the Research and Statistics Department

Disclaimer: The views presented are of the authors and do not necessarily reflect the entire view of the

Reserve Bank of Vanuatu

VANUATU MACROECONOMIC DEVELOPMENTS AND PROSPECTS

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TABLE OF CONTENT

I. INTRODUCTION ....................................................................................................................................... 2

II. OVERALL SUMMARY ............................................................................................................................... 2

III. SECTOR DEVELOPMENT – PORT VILA, EFATE ......................................................................................... 3

Introduction ............................................................................................................................................................................ 3

Services .................................................................................................................................................................................. 3

Tourism – Hotels and Resorts ............................................................................................................................................. 3

Banking and Financial Services ......................................................................................................................................... 7

Industry ................................................................................................................................................................................. 15

Manufacturing ..................................................................................................................................................................... 15

Hardware Retail................................................................................................................................................................. 17

Real Estate ........................................................................................................................................................................... 19

Transport (land) .................................................................................................................................................................. 20

Telecommunication ............................................................................................................................................................. 21

Energy (Fuel Supply) ......................................................................................................................................................... 23

Airline Industry .................................................................................................................................................................... 24

Beef Industry ....................................................................................................................................................................... 24

IV. SECTOR DEVELOPMENT – SANTO ......................................................................................................... 24

Introduction .......................................................................................................................................................................... 24

Agriculture Sector ............................................................................................................................................................... 25

Industry Sector .................................................................................................................................................................... 26

Services Sector.................................................................................................................................................................... 26

V. SECTOR DEVELOPMENT - MALEKULA.................................................................................................... 27


Industry Sector .................................................................................................................................................................... 28

Services Sector.................................................................................................................................................................... 29

VI. SECTOR DEVLOPMENT – TANNA .......................................................................................................... 30

Introduction .......................................................................................................................................................................... 30


Industry Sector .................................................................................................................................................................... 31

Services Sector.................................................................................................................................................................... 31

VII. SECTOR DEVLOPMENT – EPI ................................................................................................................... 31


Industry Sector .................................................................................................................................................................... 32

Services Sector.................................................................................................................................................................... 32

VIII. APPENDICES............................................................................................................................................ 33

APPENDIX 1: COPRA PRODUCTION .............................................................................................................................. 33

APPENDIX 2: COCOA PRODUCTION ............................................................................................................................. 33

APPENDIX 3: COMPILED BES RESULTS FOR PORT VILA ............................................................................................. 34

Overall business sentiment – Port Vila ....................................................................................................................... 34

Outlook on Growth for 2018 and 2017 .................................................................................................................. 39

APPENDIX 4: COMPILED BES RESULTS FOR PORT VILA – CLASSIFIED BY SECTOR (SECTOR WITH SPECIFIC

QUESTIONS RELATING TO THEIR TYPE OF BUSINESS) .............................................................................................. 40

Tourism .............................................................................................................................................................................. 40


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I. INTRODUCTION

The Reserve Bank of Vanuatu through the Research

and Statistics Department undertakes an annual

Business Sentiment Survey and Visitation to business

houses each year to collect sentiments on major

economic market conditions for the current year and

projected year period. The October Survey and

Visitation covers prospects and economic outlook the

first last 9 months of 2018 and outlook for 2019.

The main objectives of this surveillance work are:

To gain insights to current domestic economic

activities which will supplement projections of GDP

growth forecasts in the medium term;

To obtain information on market conditions

which will supplement the quarterly statistical

indicators of the economy released from the Vanuatu

National Statistics Office;

To identify some major issues and constraints

to growth through interviews with major businesses in

the main sectors of the economy and evaluate its

impact on the economy.

The October 2018 Business Visitation took place from

17 September to 4 October 2018, covering Lenakel

(Tanna), Epi, Norsup (Malekula) and Luganville

(Santo). Business visitation to businesses in Port Vila

took place from 8 to 15 October (including 19 and 23

October). The visit team would like to acknowledge

and thank all Respective Heads and CEOs of Business

Houses for the meetings discussions held and look

forward to similar participations and contributions in

future visits/surveys.

II. OVERALL SUMMARY

Businesses across majority of the sectors of the

economy viewed economic growth was generally

stable in 2018 compared to the previous year.

Economic growth was primarily driven by

infrastructure projects. Economic growth in Port Vila

was perceived to be steady or slow growth over the

previous year; the services sector which accounts for

more than 60 percent of the national Gross Domestic

Product (GDP), is not feeling the boom in activities as

expected. Tourism is quite slow in the first half of the

year but improved in the first few months after June,

as peak months of arrivals (August and September)

picked up. The growth in hardware retail commerce is

slow reflecting the slowdown in major infrastructure

projects, a stagnant growth in private sector

investment and increased competition in the domestic

market however the rest of the wholesale sector

recorded steady growth over the year, a similar view

presented by the banking sector. Manufacturing sector

has improved while other businesses are still building

capacity and maintaining business after 2015-2016

slowdown. The agriculture sector has dropped with

beef industry declining tremendously in 2018 and this

sector will take a few more years before recovery.

Most businesses anticipate that the slow growth in

2018 will rebound in 2019 following expectations

that the international airport extension should be

completed and Air Vanuatu adding new planes will

support the increase in visitor arrivals. Growth in

cruise-ship visitor arrivals is projected to slow as a

result of a projected fall in the number of cruise ships

in 2019. Meanwhile, outlook on future economic

growth is cautiously optimistic, as progress will depend

highly on the main projects completed as scheduled,

and constraining issues of concerns are addressed.

Economic prospects on outer islands looks promising

and optimistic; however, the 2018 year performance

is constraint by reduced commodity prices in 2018 and

impact of natural disasters affecting production of

copra and other major export-earning commodities.

Other commodities such as kava and cocoa improved

or remain stable. Kava production in Santo continue to

remain strong. Views from the financial sector

continues to provide an optimistic view of the

development in the agri-business sector in the outer

islands has provided a potential for this sector to grow

despite constraints affecting production. The fall in

production of major commodities drove farmers to

divert to kava production and Regional Seasonal

Employees (RSE) scheme to cover the loss. The

manufacturing sector performance in Santo and Epi

declined driven by drop in production capacity from

the coconut oil mills, while construction activities

relating to CCECC roads on Malekula continue to

progress. Construction activities in Santo, Epi and

Tanna slowed down following the completion of road

infrastructure projects. A few construction for hotels in


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Santo progressed in 2018 while private investment

continues to remain stable. Wholesale and retail

activities remains stable in outer islands supported by

the strong pickup in kava industry while the relocation

of Ambae evacuees to Santo has contributed to

increased commercial business in Santo.

Overall, businesses viewed that the economy has a

steady or stable (flat) growth in 2018 with a number

of sectors noting negative outlooks for the short-term;

however, the medium to long-term outlook is positive,

with prospects for 2019 expected to rebound, with

businesses’ mixed views of outlook remaining

cautiously optimistic to optimistic. Outlook is highly

dependent on new plans boosting various important

sectors such as tourism and scheduled project plans

materializing.

III. SECTOR DEVELOPMENT – PORT VILA, EFATE

Introduction

Efate hosts the main capital town of Vanuatu, Port

Vila, in the SHEFA Province. According to the 2009

Population Census, Port Vila has a population of

approximately 44,039 people and made up 77

percent of the urban population (total urban

population made up 24 percent of total population).

Efate hosts a number of tourism sites (Blue Lagoon,

Eton beach, Havannah Harbour, Cascades Waterfall,

etc), major hotels and resorts that continues to receive

more holiday visitors. The services sector is mainly

focused in the main town, Port Vila (including the

second town, Luganville in the Northern Province)

which hosts the main business hub and international

airport.

The main international port of entry, Port Vila

Bauerfield International Airport receives more than

8,000 visitors per month. A Lot 1 contract signing (late

April 2017) has allowed the rehabilitation and

extension of the International Airport runway under

the Vanuatu Aviation Investment Project (VAIP),

funded by a soft loan from the World Bank. The

rehabilitation will allow the International Airport to

receive larger aircrafts than its current capacity and

increased flights from larger markets.

Port Vila receives approximately 100,000 visitors per

year and transit holiday visitors travelling en-route to

the outer islands tourist destinations. Air arrivals to

Port Vila account for 95 percent of total air visitor

arrivals per year (103,401 visitors in 2017, a 16

percent growth over the year). The main domestic

airline carrier, Air Vanuatu has code-share

agreements with other regional airlines including

Virgin Australia, Fiji Airways, Air Calin and Air Nuigini

(*as well as Air New Zealand and Qantas who have

both ceased flights from March 2016 following

runway problems; however Qantas has re-commence

its code-share flights to Port Vila from 15 June 2017).

Over the years, Port Vila, a main cruise-ship port

continues to receive more visitors with approximately

over 200,000 day visitors per year (total cruise-ship

visitors to Vanuatu totaled 223,551 in 2017, a 13

percent increase over the year)

With the main business hub and international wharf

situated in Port Vila, most imports for business services

and household consumption are off-loaded in Port

Vila. Port Vila receives approximately over VT30,000

million worth of imports per year (compared to

Luganville with approximately over VT5,000 million

worth of imports per year). Port Vila received

VT33,102 million worth of imports in 2017. On the

other hand, Port Vila exports approximately over

VT1,500 million worth of goods per year (compared

to Luganville with approximately over VT3,000 million

per year). Port Vila exported VT1,790 million worth

of goods in 2017.

Services

Tourism – Hotels and Resorts

Room Occupancy rates - Resorts room occupancy

rate is relatively low in the first half of 2018 but

increased in the second half of the year as a result of

extra flight by Air Vanuatu boosting arrival numbers.

One of the big resorts in Vanuatu confirms room

occupancy rate for September 2018 is fully booked

with 100% room occupancy rate (all 142 rooms).

Hotels within the Central Business District (CBD) of Port

Vila have high level of occupancy rate due to its good

location. Hotel room occupancy rate is relatively high

around the level of 70% - 80%, a normal trend all


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throughout the year. The September 2018 room

occupancy rate is 100%. According to booking.com,

bookings have also been very high in August 2018,

while tourism business for the rest of 2018 was

relatively quiet and slow. Hotels such as Mooring

Hotel, receive the usual corporate business clients as

the hotel mainly focuses traditionally on business

visitors, therefore, most bookings are done on a short-

time or last minute. Business visitors do not book in

advance like holiday visitors and is one reason why

this segment of visitors’ forward bookings for the next

few months is quite unpredictable. Hotels such as

Grand Hotel indicate a slow leisure business market

and receive holiday visitors mainly from Australia and

New Caledonia and a pickup in the Chinese market,

while the New Zealand market remains stagnant.

Accommodation services is down but better than last

year. A contributing factor is the cancellation of the

Air New Zealand flights to Vanuatu (Air NZ ceased all

flights to Vanuatu since 2016), and this is evident

seeing Air Vanuatu flights to/from NZ are half full

during the low season periods. Air NZ has also

confirmed that there are no plans in the horizon to

return to Vanuatu. Accommodation improved in the

September-October 2018 period as visitors from

Australia picked up during the school holiday. The

tourism food and beverage sector remains steady,

however the notable increase in local customers

indicated increase in interest.

Room occupancy rate is low for the first half of the

year (compared to 2017) partially explained by the

increased number of holiday visitors choosing and

traveling to outer islands for their holidays (and not

staying in Port Vila). Additionally, Port Vila tourism

business environment was harder in 2018 due to

increased competition in the tourism industry. For

resorts like Nasama, (the resort has 43 apartments

with a total of 130 beds), the best performing month

in 2018 was September 2018 which saw room

occupancy rate increased from 30% (first half of the

year) to 90%. So far, business performance is same

as last year (2017), but it is harder in 2018 Room

occupancy rate has recently increased to 70% for the

months, September-October 2018.

Another upside contributing factor to the improved

outlook for tourism (for September-October 2018)

was the increase in Air Vanuatu flights effective June

2018. Increased flight frequency per week

(additional flight with daily flights in operation) from

the Australian market to Vanuatu boosted holiday

visitors. Markets of visitors arrivals includes: 70% from

Australia, NZ 20-30% and 10 percent from other

markets. Visitor arrivals from long-haul markets like

Japan and European visitors (through New Caledonia)

rose over the year.

Increased competition in the market, but successful

if better strategies are in place – for a number of

hotels in Port Vila (close to the CBD) like Moorings

Hotel have worked on marketing strategies to making

appealing for their visitor clients. The hotels provide

opportunities for hotel trainees from Australia and

New Zealand tourism students to gain the experience

in Vanuatu but also their ability to market Vanuatu

tourism/hotels to families and friends. Businesses also

offer conference rooms for conference/meetings. The

availability of space, meal catering and

accommodation, offered by hotels in the CBD makes it

a better and cheaper option for conference visitors

than the National Convention Centre. As a result,

businesses view that there has been growing interest

for event organizers to use hotels rather than the

National Convention Center for conferences.

Business conditions – In general, tourism arrival in

2018 is a growth from 2017. Some (large) resorts are

doing well whiles others are not doing well. Business is

generally slow but with steady year-to-year growth,

although 2018 was better than 3 years ago (post-TC

Pam). Tourism businesses located on the route of

cruise-ship visitor tours (to blue lagoon and around

Efate Island) receive frequent visits and interests from

cruise-ship visitors for stop overs at the

resort/restaurants.

Due to the increased competition in the tourism industry

market, various business view that conditions was hard

in 2018. Hotels/resorts continue to experience

consistent high level of overhead costs – particularly

high electricity/utility bills.


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Investment-wise – A number of resorts have

undergone refurnishing of their hotel rooms. Other

future plans will really depend on whether the

government will give incentives for investment into the

future and increased confidence in the economy, then

planned projects may continue. For smaller hotels in

the CBD, recent investments in 2017 includes building

of decks and refurbishment of hotel rooms. Hotel has

focused on upgrading standard while price of hotel

rooms remain fixed. Most small tourism businesses in

Port Vila have done some refurbishment but have

particularly focused on maintenance over the last year

to maintain their business.

Current issues worth addressing to ensure

sustainable and continuous growth in the tourism

sector: there is currently lack of land to build hotels

and no building-standard in place to build good

hotels, and accommodation-types are not recorded/

registered and not levied, so they contribute less or

nothing to the main marketing and promotion funds of

Vanuatu as a tourist destination. There should be

proper standardized hotels who are registered and

equally pay their levies to the main marketing fund.

At the moment, there is non-compliance and only the

large hotels and resorts pay these levies to the tourism

marketing fund (views from Le Lagoon Hotel).

Majority of hotel needs are imported from outside

including food as a result of the expensive domestic

prices of locally produced products; although

vegetables are locally sourced from the markets which

is cheaper. Although local products (soaps and

shampoo) have been bought from the local producers,

the supply was not sustainable, so orders were

imported from overseas/ international market where

price is cheaper than the local market price. There is

increasing demand for local produced products (soaps

and shampoos), but need to be sold at suitable

(cheaper) prices.

It is also evident that although visitor arrivals have

increased, a number of visitors are not staying at the

hotels. The Airbnb is also becoming an issue of concern

to the hotel/resort tourism market, as most individuals

or hotel-like business in this stream of business do not

pay levy to the Vanuatu Hotel and Resorts Association,

thus the Airbnb is not regulated. The Airbnb is

competing with the main stream tourism market

players. Most sellers under the Airbnb stream do not

pay business license and do not pay tourism earnings

(levy) to the Vanuatu Hotel Resort Association (VHRA),

as part of the Tourism Marketing Developing Fund

(TMDF) which do not benefit the wider tourism industry.

It is best for the interest of the tourism industry and

should be “mandatory” that all sectors involved in the

tourism business pay in their tourism levies; as

currently, only the big tourism businesses are paying

in this levies and not the small ones. The government

should ensure that Airbnb is regulated to standards

(and pay tax) for proper operations. It is expected

that the current lobbying for all businesses to pay will

be finalized and become mandatory for all to pay in

order for ‘all’ tourism businesses to support marketing

of Vanuatu as a tourism destination.

Tourism in Port Vila (and Vanuatu as a whole) is

constraint by the currently low tourism marketing

budget; and the difficulty in finding skilled and

qualified workers that are properly trained as a lot

of workers find job opportunities on (P&O) cruise-

ships. This makes hiring of such qualified workers more

competitive (for some operations, it may lead to

increased wage increase in the tourism sector).

Comparable with regional tourist destinations, like Fiji

(Vanuatu’s competitor), the airline ticket for travel to

Vanuatu is still relatively expensive and not

affordable by travelers. The low level of security and

safety of tourists needs to be addressed, prioritized

and improved.

It is imperative that if the country is able to attract

International Brand like the ‘Warwick Resorts and

Hotels groups of hotels’ in Vanuatu, then visitors will

tend to go for that brand as it is internationally well

known. So more promotion is needed to attract

international brand hotels into Vanuatu by providing

them incentives to establish in Vanuatu and operate.

Forward looking

Tourism arrivals is expected to pick up boosted by Air

Vanuatu’s plans to add 2 new planes by mid-year

2019 which will further increase capacity on major

routes and expected to increase air visitor arrivals.

Tourism will also be boosted by a new tourism

marketing brand (currently in work-progress) and


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expected to support marketing Vanuatu as a tourist

destination. The new tourism brand (taking over the

2009 brand – “what matters”) is due to be released

soon, should be able to support the whole real

meaning of tourism, capturing the involvement of

communities and highlighting the true attraction of

Vanuatu as a travel destination which will be

appealing for travel tourists who choose to come to

Vanuatu for their holiday.

Tourism in 2019 is expected to be higher than the

2018 levels. Resorts (a few that are not struggling)

view that their business performance is expected to do

well in 2019, better than 2018 (2018 is better than

2017).

Next year, in July 2019, Warwick Le Lagon has

confirmed to host the 19th Global Symposium

Regulators Forum (International TRR Forum) and

confirmed that around 700 delegates will attend this

global event. There is, however, concerns that there

are not enough rooms to accommodate all these

participants; there are ongoing plans for Warwick Le

Lagon and other hotels and resorts will take up these

expected increased number of delegates. There is

issues of shortage of capacity to accommodate for this

big event which falls on a peak holiday visitor arrival

period (school holidays). Other than this, currently

there are no new information of new resorts or hotels

opening in the next 3 months 2018.

Proposals that will support growth and

development in the tourism sector: Tourism

development should include working closely with local

communities – it is necessary for tourism operators or

those in the tourism business to work closely with local

communities – increasing their knowledge base of the

importance of tourism to Vanuatu community

development and the tourism products (culture or

attractions) that are important to Vanuatu tourism.

Tour guides/taxi drivers to village sellers should be

able to talk about the history and tourism products to

make it more appealing for tourist visitors.

Outer island tourism will become appealing for

visitors, if they are guaranteed that they are safe

therefore, there needs to be more effort to address

safety issues and provide proper hospitals in the outer

islands which will guaranteed them that medical issues

can been address if there were emergencies or outer

island hospitals have the capacity to respond to

accident incidents (if it should occur). Little things are

important even if they may be very insignificant.

There is need for the government to further support

and promote tourism in Vanuatu; most importantly the

need for more investment into the tourism industry and

value the high contribution that this sector does for the

economy through providing employment and

supporting sustainable development in the country as

a whole. This includes putting the focus efforts on main

markets of tourists: Australia, New Zealand and Air

Caledonia and not undermine/reduce prioritizing

marketing to these main tourist source markets.

The Airbnb which is an online community market place

that connects people looking to rent their homes with

people looking for accommodation is a new business

stream in Vanuatu/Port Vila. However, it should be

regulated; often bad experience of using the Airbnb

are shared on social media, leaving a damage on the

whole brand and image of Vanuatu as a visitor travel

destination. This also refers to the unregistered tourism

accommodations (e.g. Asian investment on

accommodations).

There is high need for the government to provide more

incentives to the investors to invest in the tourism sector

in Vanuatu. Other recommended options of investment

includes: the option of Financial Institutions (like the

RBV or VNPF) investing on hotels or resorts (as there

are similar successful examples around the world);

creating more VNPF investment in hotels and

restaurants so as to bring returns; investing in the stock-

market for the agriculture sector which will that should

have long-term impact on the economy in the long-

term; investing a portion of the passport sales revenue

to target tourism, a major source revenue for the

country (by contributions through the tourism marketing

and promotion fund) and new incentives should be

provided by the government to support and motivate

investors to invest and grow their business. Already it

is likely that other markets of investors could be

reluctant to invest in Vanuatu (considering the large

increase in Asian buyers of passports) due to the issue

of over-crowding by Asian investors and the


7

government is not doing enough to support them by

providing them incentives; and the government should

provide more fund support for marketing by the

Vanuatu Tourism Office.

Little development has been made and a considerate

amount of good waterfront land have been sold to

investors, mainly Asians. These land sales should only

be made to prioritized development investors who

make realistic contribution to the economy by

providing employment and development that will

support the economy, rather than for speculative

investment that does not bring economic development.

In quarter 4, 2018, there have been feedbacks that

Air Calin will cut down on its number of flights per

week; 2 per week to one per week. This may affect

the travel times/options for visitors and reduce the

number of holiday visitors/business visitors from New

Caledonia and will affect business.

It is essential and important that there should be an

appointed person to sell/for hire, the National

Convention Centre; currently there is no appointment.

The appointed seller/person should be carrying out

2018-2019 marketing for the National Convention

Centre events (most possibly internationally organized

events) for 2020. This initiative will bring revenue to

the government and maintain the building in the long

run.

It is highly recommended that the VHRA should

gazette the tourism levy so that all tourism business

pay. Currently a certain number of

companies/companies are paying (only a few

hotel/resorts are participating) while the rest are not

paying in this levy or regulated and it undermines the

budget for marketing Vanuatu as a tourist destination.

All tourism business should contribute to the Tourism

Marketing Development Fund (TMDF). The result of

such shortage of funds – includes the instances of the

cancellation of the VTO Road Show to Melbourne this

year, although there is demand from buyers from the

Melbourne market, potentially a source of tourist

visitor market.

Looking forward, the 2019 outlook for tourism is

optimistic. The new tourism rebranding will support

tourism going forward. The new cooperation between

Aviation Vanuatu Limited (AVL), Vanuatu Tourism

Office (VTO) and Air Vanuatu working together on a

10 year joint-strategy plan will help to drive tourism

forward, a boost for tourism in Vanuatu. However, the

increase in funding for the TMDF for marketing and

promotion is essentially important as well. Otherwise,

the challenge faced by the leisure tourism market will

continue as it has been so far a difficult 2018.

Banking and Financial Services

Financial services business in 2018 – 2018 business

sentiment is general slow. 2018 is a transmission year

for the financial sector, as banks are involved in

getting all the non-performing loans sorted out.

Vanuatu’s national bank, NBV continue the progress

work on financial inclusion and banking activities

moving into increasing lending for Agri-business which

has supported the increased interest in Pentecost and

Santo where the kava and businesses have increased.

With the efforts of financial inclusion and the unique

case of Ambae volcanic crisis and evacuation to Santo,

there has been high deposits by rural people (from

Ambae) into bank accounts (and opening of more new

accounts in Santo) for savings. This would be otherwise

not done so, before. As a result, Santo has become a

busy commercial location.

The banking system continue to endure high liquidity in

the banking system – still banks are not lending due to

the low demand. While banks dealing with rural

banking has diversify to focus on rural lending to

agriculture, rural business, rural land and RSE lending.

Recently the local bank has seen a big increase in

lending to Agriculture and small bungalows in North

Efate – indicating the rise in interest for agri-

businesses and local tourism projects. The focus on the

local (ni-Vanuatu) market includes the introduction of

ni-Vanuatu housing loans at low interest rates

beginning October.

Views from other financial institutions (CCVL) confirms

the progress and good performance made compared

to previous year (2017). The business provides lending

for commercial and mainly land transport. The

completion of the road projects on Malekula and

Pentecost Island has provided great opportunity for


8

SMEs and small local businesses to grow. Good roads

has brought good benefits for the 80 percent of the

population of Vanuatu, living in outer islands and has

brought opportunities by empowering and motivating

local businesses to expand and grow.

These two sectors, Tourism and Agriculture are

important sectors for the local economy. From the

business point of view, customers buy transport

vehicles to transport tourists from airport to tourism

bungalows. There are increased interests from

customers to buy transport vehicles for transporting

kava (a major high-earning commodity grown for all

islands across the country) for production and

shipping. Therefore, it is important the government

should increase the focus on kava for the local farmers

and communities in Tanna and Santo. The increasing

importance of these sectors to rural development

makes it equally important for the government to

continue to put additional priority into infrastructure

development.

Evidently, there has been a big change in the mind-set

of the local; there is increasing interest to buy vehicle

for transport business and rural commercial business in

the rural areas. On the other hand, there should be

promotion of the Value-Added Industry as there is big

potential for its contribution to the economy. Tourism is

expected to grow with increased promotion

associated with these new roads. The direct flight to

Bribane-Luganville flight contributed to the increased

number of visitors to Santo and outer islands. Santo

commercial market has picked up as result – demand

has increased and transport businesses have

increased.

Other banks see slow business sentiment for the last 9

months (ANZ bank). More achieved work was

concentrated on simplifying and de-risking operations.

The outlook is positive. However there remains key

challenges: the income tax and grey-listing (which

have been addressed in the year). Meanwhile, in

2018, there has been a decline in lending due to the

strategies of de-risking and the projected growth in

lending will depend highly on continuous optimism and

confidence in the market.

In terms of financial inclusion, while some banks have

concentrate on fine-tuning their products, others have

rolled out new ones. ANZ has recently rolled out its

Go-money platform despite some delay and recently

refocus a partnership with Unelco (Electricity Supplier)

early October 2018 on the payment Go-money

platform (version 1) offering convenience and

improved efficiency in payment services for customers.

Other banks view 2018 as a better year than last

year (2017). From Bred Bank’s view, the banking

sector non-performing loans (NPLs) have peaked and

now start coming down. In 2016, cyclone Pam and the

runway issues have impacted on tourism. It is most

likely the runway issue has more impact than Tropical

cyclone Pam; and one airline (Air NZ) halt all flights to

Vanuatu. In the medium term, businesses are rebuilding

capacity. The outlook is promising with expected new

additional flights by Air Vanuatu operational from

June 2018 onwards towards February 2019, which

will boost arrivals for half of the year supporting

tourism recovery. The positive outlook is supported by

the new arrangement between Vanuatu Aviation

Limited (AVL), Vanuatu Tourism Office (VTO) and Air

Vanuatu working on a joint-strategy plan for the 10

years supporting visitor arrivals and tourism in

Vanuatu. This joint-venture will provide support for

funding that will and bring positive growth in Vanuatu.

The economy is growing positively with the increase in

public infrastructure projects happening over the last

two years. Now it is time for the private sector to ramp

up private investment such as developing tourism;

however, this is something yet to be seen (Bank of the

South Pacific). The general sentiment shared by

financial sector and all banks in general is that current

economic activity is supported by infrastructure

projects. With those infrastructure in place, most are

waiting for the private sector to start taking over – but

this has not happened as expected. There is high

liquidity in the banking system, and there is aim for

banks to drive credit growth, but there is no demand.

The uncertainty in the economy, including speculations

on the income tax and sustainability of the economy

are issues behind investors still holding on their

investment plans. The banking sector is keen to see

investors investing, however potential investors still

waiting to see what happens.

Banking operations - The busy business operations in

Santo resulted in more additional workforce in the


9

northern island branches. The pickup in activity in the

Tanna and Santo commercial centers saw an expected

establishment of branches there or increase in the

number of workers in existing branches. Most banks

indicated that the number of ATMs have increased in

2018 and further increase for those banks introducing

new branches in 2019.

The cost of operations has stabilized at the moment,

however, for the local bank offering rural banking,

there have been increased operational costs from

operating all the branches (stretch all throughout

Vanuatu). The cost of moving cash is also expensive.

VAT has increased and cost of utilities rose as a result

of increased cost of fuel. The impact of the VAT

increase has inflationary pressures on the economy, all

due to the increase in VAT and minimum wage.

Outlook of growth in 2018 - Expectation of 2018

growth to be flat compared to 2017; the GDP growth

projections of 3-4 percent growth was primarily

driven by construction activities, otherwise much of the

growth is not realistically felt by other businesses; this

is the general view from the banking and financial

sector with views from NBV. Most of this growth is

donor-driven so therefore expectations for growth in

2019 to remain flat.

The flat year in 2018 is mainly driven by donor

activity, and since donor have a choice to bank in some

banks and not in others, obviously, some will not see

the material benefits of the donor funds into the

banking system. Most importantly, donor funds do not

affect asset/liability of banks, as the real activity is

mainly sourced from business financing.

In terms of commercial financing, the full spectrum of

foreign investment is still weak; much of the income

wealth is from the tourism sector which is expectedly

slow in 2018, and most investors are waiting for the

completion of the airport and haven’t really made any

new investment plans yet. The new tax framework also

brought a lot of uncertainty specifically how it will be

set-up and developed, so far it has not convincing

outcomes yet, as there need to be more settled

discussion providing how the income tax will work to

support foreign direct investment. Currently, investors

are not doing anything and a holding up their

business plans.

Prospects from other commercial banks (Bred-Bank)

notes there continues to be downside risks to future

economic growth for Vanuatu. These future risks

includes the frequent occurrences of natural disasters

(cyclones) that will affect growth; therefore, the

country has not build enough buffers to accommodate

the effect of any future cyclones. There is not enough

good years to build up the buffer again and there are

risks of the country lacking the financial buffer to

rebound if a future natural disaster does occur.

In the short term, growth is supported mostly by

ongoing infrastructure projects. Tax discussion is

another issue that have impact on investor’s confidence

in investing in the future. Investors will invest if there is

clear discussion on the future tax implications (good

and bad). General views convenes that income tax will

not happen yet until 2020 election year and will

depend highly on the political will by the new

government to implement this new tax reform.

The positive outcome for the economy is the prolonged

political stability that has brought confidence; but

while the work on political strategies for government

stability is good, the government could be missing out

on spending time and money on more necessary

agendas such as development of the country and

fixing the airport runway earlier to avoid the

problems (cancelled flights) that occurred in 2016.

Issues concerning investor confidence is on the rise from

2017 to 2018, the uncertainty surrounding taxes

(income tax) is high. Investors are now starting to invest

and few are still deciding where to invest; some are

considering the low-interest rate environment so it is

important to create a good investment climate and

environment. At the moment, the banking system has

high liquidity but there is limited demand for credit –

but there is hope for this to change in the future for

private investment to pick up, guaranteed that there

are no surprises such as cyclones and change in

government policies that may have impact.

Risks to investor confidence depends highly on when

the extended international airport runway project will


10

be completed. The expected date of completion could

be June 2019 but is highly dependent on the

contractor’s work progress on the runway is not

delayed. However, risks are mitigated as much as

possible to reduce the impact.

Other banks (BSP) also share similar views. Vanuatu

has the potential to bring more tourists into the country

which will have great implication for the economy but

there is not enough investment to support this sector.

Tourism marketing is a priority. And considering the

high cost of air-fares, in comparison, flights to Bali is

cheaper than a ticket air-fare to Vanuatu. Good

strategies should be formulated to address what

Vanuatu can offer to get tourists into the country,

encourage cruise-ship visitors to spend in Vanuatu and

good selection of tourism projects. Providing incentives

and contracts for local businesses to work on these

projects will increase the multiplier effect on the

economy.

Air Vanuatu should support air visitors by giving them

incentives; for example, considering subsidizing

airfares. In Fiji, there are packaged deals to get

visitors into the country. In Cook Islands, airfares are

subsidized making visitors fares cheaper, driving up

visitor numbers. Tourism has fallen in 2015 but is still

improving. Vanuatu is a small country but have big

potential, so it is important to focus tourism marketing

on the 90% of tourist markets (Australia, New Zealand

and New Caledonia) rather than other markets.

Economic growth is sluggish in 2018; the outlook of 3.2

percent GDP growth released by the IMF/World

Bank/ADB is realistically too strong, and is not felt by

the business in general. Bank loan market growth has

been generally slow (weak) all throughout 2018

compared to the previous year. The ADB’s growth of

3.0 percent might be right to include the infrastructure

in place; but the cash flow effect aid money through

projects is not felt in the economy. There is a lot of

leakage from donor projects. There are still issue

about raising revenue – VAT is not sufficiently

collected – some businesses are not paying their VAT.

Foreign contractors that employs their own labour

from overseas contribute to leakages of aid out of the

country. Building infrastructure and stimulating the

economy is priority, however in the process, giving

contracts to foreign companies leave local contractors

(such as Downer) without projects, so money/aid is not

circulated within the country. Government should make

decisions to allocate relevant project contracts to local

contractors.

The uncertainty from the income tax development and

implementation is a reason behind why investors are

waiting and not investing. There should be more clarity

on the tax issue so investors can roll out business plans.

Forward looking

2019 will see a flat growth. The outlook for 2019

includes the continuous support through financial

inclusion provided by the local bank, NBV, who have

provided the establishment of 524 community hubs

providing support for financial literacy to the rural

communities.

In 2019, the banks (Bankers Association of Vanuatu)

are focusing on work on an interchange IT project that

will beneficially reduce the cost of transaction

between banks. NBV has also embark on a mobile

app that will support the rural and overall country.

The government need to focus on ‘Infrastructure

Resilience’ as means to support those current

development of infrastructure projects in the outer

islands for the longer run. For example in Malampa

province, there is great potential for growth in

agriculture and tourism business, but there are a lot of

rivers, and during periods of disasters, flooding rivers

affect transport. Secondly, the impact of land disputes

affect businesses in the province as well.

All financial institutions indicate efforts (progressively

from 2018) and focus on financial inclusion and a

number have targeted awareness to specific clients in

terms of basic management and progress towards

loans (mainly rural) supporting agriculture and tourism

sectors – as business potential pickup in Santo, Tanna

and Malekula. 2019 will also see new plans on

financial inclusion rolled out. It is important for the

government to find out the main product of each island

(the underserved areas) by adding flavour and make

it a unique experience, like the case of tourism

experience and providing incentives for business


11

development. Most banks are planning for future

growth, investing and focusing on training and

development. The support of the new work-in-

progress interchange platform between Banks will

also help.

Other banks (Bred Bank) concentrates on improving

the asset quality of the bank. The outlook for 2019

will be a better year than 2018; non-performing loans

have started to reduce and there is hope for sales

(loans) to pick up. The bank will concentrate on fine-

tuning existing products and focusing on electronic

banking. It is good to see the government moving to

electronic payment encouraging the government to

get out of cash-handling and electronic payment will

help.

New development in the banking sector will include

the establishment and operation of the new

Wanfuteng Bank Ltd (WBL) in the domestic market. It

will target big businesses, mainly retail banking. Its

difference from other banks is that, the new bank will

not concentrate on financial inclusion like other existing

banks do and likely the new bank will be faced with

few start-up challenges but its progresses will pick up

in a short term.

Despite the downside risks in the horizons, the outlook

remains positive for the banking system. Alongside

ANZ, the other three banks are now working on an

electronic banking project that will improve and

increase efficiency in the bank-to-bank operations.

This new payment inter-change project will roll over to

2019 and the banking sector is working with IFC (an

independent party) to oversight the work. The

commercial banks have agreed on a framework and

the current work-in-progress includes establishing the

IT structure. The project is expected to be completed

by end of 2019, giving access and connectivity for all

banks. The new focus of commercial banks on

electronic banking will reduce costs and acquire less

cash handling, making payments more efficient.

There is an increasing and improving trend in the

availability of aid into Vanuatu lately. As a result,

there are increased delegation visits by these

diplomatic agencies (Australia, New Zealand, USA,

France and Japan) to Vanuatu this year 2018 and

further announcement of the proposed new

establishment and opening of British Embassy and

Japan Embassy in Vanuatu in 2019. The strengthening

and increasing diplomatic ties attributed to more aid

funds available, good for Vanuatu guaranteed funds

are put into productive use.

The submarine cable due to be completed by 2020

will bring a lot of positive impact for the Vanuatu

economy. This cable will run through from Solomon

Islands to Santo. The improved data infrastructure will

encourage and stimulate growth in Santo economy.

The Australian Government will fund the

PNG/Solomon Is cable, and with the Fiji cable also

running through, Vanuatu will benefit by having a

backup investment on both cables. The progress and

impact of the submarine cable is positive and will

make Vanuatu an attractive investor destination.

Vanuatu’s removal from the AML grey-listing has

supported the banks although it has taken quite some

time; and Vanuatu still needs to work more on this.

Passport sales involves a lot of risks if is not controlled.

Banks operations does not accept funds on compliance

for legitimate reasons and do not deal with high-risk

industries.

For other banks (BSP), the outlook for 2019 is focus on

growing the loan market share. The economy will

grow, however, there is a big risk if the market is not

growing. Aid and tourism are the two main drivers of

growth. There is optimistic outlook for Vanuatu and the

economy will benefit from this, if more support was

provided for tourism in Vanuatu, becoming more

tourist-centered and making it cheaper for tourists to

visit Vanuatu (currently it is expensive). The outlook for

tourism for 2019 is positive supported by Air

Vanuatu’s plan to introduce in 2019. It is important

that the government create a ‘certain economic

environment’ in order to grow investment and

confidence in the market.

Wholesale and Retail Services

Wholesales retail in 2018 - Wholesales retail in 2018

is better than 2017 (views from Punjas Ltd) with the

business recording slight single digits growth (less than

5% growth). Over the last 9 months, business

performance is up and down, economy is not that


12

stable. Unaccounted for cyclone occurrences, it is likely

that everything might go well from towards 2019.

Part of the reason for the slowdown is due to tourism,

a major contributor to economic activity is slow;

however the new upgrade of the international airport

has started, there is bright prospects for more arrivals

from the Australian and New Zealand market upon its

completion in 2019. Cruise-ship arrivals is quite slow

with just about 2 cruise-ships per week, so far in the

second half of the year; this may have impact on

tourism spending as well.

Copra prices have dropped, although kava export

has picked up.; and this will affect rural spending. The

dry season has affected vegetable and root crops

production. The impact of the Ambae volcanic eruption

contributed to increased humanitarian aid support to

communities in relocated areas, and the demand for

basic items (such as biscuits, sugar, tea and rice) have

picked contributing to an increase in business in Santo.

For Port Vila, it is business as usual with no change

from the previous year and also it is not a hub in strong

business growth as it does for Santo right now.

Business performance is also depended on the supply

and demand in the market; and the need to stock

reserve merchandise goods. In 2015, demand for

stocks rose due to the impact of TC Pam. In 2018,

wholesale and retail business has pick up with

increased demand from the outer islands, particularly

locals with the increased distribution from the Santo

branch.

Various other wholesale and retail shops have re-

focus their business sales strategy to focus on outer

islands and have seen increase in business and

distribution to the Pentecost, Malekula and Tanna

markets (views from Esah Corp Ltd). Santo business

performance is up and down. Market continues to

fluctuate due to increased competition in the wholesale

and retail sector. Merchandise product prices have

increased as a result of the VAT increase earlier in the

year. The level of competition will further increase as

the new entrants to the wholesale and retail sector

begin operation. Some wholesale and retail stores

have also lost some big business customers from

Ambae Island following the impact, as local-operated

businesses close down and relocation of people to the

island of Santo and Maewo.

For other wholesale and retail, generally,

performance of the business and the economy has

been steady (and quiet) so far in 2018 (views from

Au Bon Marche), specifically following the weak and

slow sentiment from the hotels in Vanuatu; aside from

the infrastructure projects that are driving up

construction activity in the economy. Sales from the

wholesale business is generally pretty steady

compared to the same period of last year; it is the

normal growth but is steady.

The boost from the infrastructure projects and

spending from returning RSE seasonal workers

contributed to the money circulation in the economy

thus so far it is good for domestic economy. The small

increase in business was associated with the recent

evacuation in Ambae to Santo/Maewo which saw

increased orders for supply of

groceries/humanitarian aid to those evacuated

communities. This was inline with the increase in

government budget support to this disaster crisis.

In terms of retail shops servicing the local and tourist

markets (duty free shops like Fung Kuei), 2018 is a

difficult year compared to 2017 and 2016 (this is

likely evident from the VAT returns from customs from

the monthly reports on domestic and duty free

commercial activities, produced by the business).

2018 is a difficult and steady year (as compared to

previous year, and weather didn’t cause much

disturbance (for Port Vila) when compared periods of

2015 TC Pam. In terms of Duty Free, sales are

consistent but are down compared to 2017; this is

evident from various closure of retail shops (x3) which

includes Tusker closing a retail store.

For those retail shops (Fung Kuei) in the CBD of Port

Vila, much focus was on restructuring shops –

introducing new products and brands at competitive

price and quality with regional and domestic

competitors. Part of the progress of meeting

competition, businesses have focus on training staff

and staying competitive in attracting cruise-ship

visitors and maintaining the market share.


13

In terms of the local market, business sales have

declined – a fall by double digit. The reason for the

fall is that there is increased competition in the local

market. The local market has grown big and strong.

For example, Digicel and TVL now sell hand cell-

phones and not just connectivity and that is the reason

why Fung Kuei and other retailers of hand cell-phones

may lose market share. The local market has changed

becoming more flexible; and now the Hardware shops

now sell television, something they haven’t done so in

the past. Domestic business has declined, only meaning

that business has flow to other uprising business

competitors and retailers in the market. For other

wholesales, business has fallen down, businesses are

finding difficulty due to fewer customers, the local

market is not strong and majority of locals now

spending more money on other personal items (mobile

phone refills and kava) and less on groceries.

Overall, the Duty Free business is consistent, but the

local business has declined. The business has lost the

local business to other businesses who are likely to sell

at a lower price – but are affordable for that local

market.

Business operations – few businesses have not

reduced labour but maintained the number of workers

and the working hours are relatively same as last

year.

Wholesale and retail includes distribution to major

islands like Tanna and Malekula, outer islands and

other retailers in Port Vila (view from Esah Corp ltd).

The Free On Board (FOB) price or freights are

expensive. There are shortage of ships for servicing

the islands (a few local ships are undergoing repairs),

resulting in cargos on halt at the wharf. The completion

of the new Lapetasi International Wharf project

helped weekly inward shipments (imports).

Other businesses see no change in employment.

Recruitments involve recruiting new staff and

replacing old staff all throughout the year. Domestic

prices rose in 2018 compared to 2017 due to the VAT

increase and the impact of the appreciating US Dollar

which means importers need more vatu to buy imports,

and increasing cost of shipping to outer islands; this

increased the cost of imports for the wholesale

business. Rice is particularly imported from Vietnam,

Singapore and Indonesia, therefore, rice price remain

relatively stable. There is relatively no change in the

utility costs.

Minimum wage has increased the same time VAT

was increased, so there is no real effect on

purchasing power of the domestic market.

Considering all these, rent room cost and bus-fare has

increased, so domestic consumers are purchasing at

the poverty line. Majority of workers are at the

minimum wage payments, but still cannot afford

quality products.

For bigger wholesalers and retailers (Au Bon Marche),

employment has been picking up in line with growth in

business. The increase in population growth and the

increased demand were the main contributing factors.

Outlook for growth in 2018 - 2018 should be a good

year with sales around the same level of last year

(Punjas Ltd). On the other hand, profit is expected to

fall due to the increased competition in the wholesales

industry, as more businesses bring in the same product

and compete with each other. Competition for the

same product is good for the consumer (prices remains

relatively stable); but the wholesale and retail suffers

as profit falls and the most likely the end result is

reducing labour.

The retail business has been doing well with the latest

development in agriculture sector and the

government’s support for the PACER-plus is good for

the country in terms of major trading partners

providing the services and goods for the country (Au

Bon Marche). From the point of view of retailers, such

opportunities should be explored more to maximize

the benefits from the pacer-plus trade agreement with

Australia and New Zealand.

The wholesalers/retailers is a buyer of local produced

agricultural goods supporting local producers and

vegetable suppliers. The local project of planting

onions and potatoes have been successful, however, in

order to sustain this into the future, domestic supply

needs to be sustainable to address the current issue of

increased domestic demand and shortage of supply

to the wholesales outlet. Majority of retailers need to


14

import to fill up the shortage of supply. The recent

land law implemented by the government for

agricultural land leases in rural areas that will restrict

leases converted into residential leases/subdivisions

and pay tax to the government; this will bring some

positive support for development of agriculture and

support productivity in the long-run.

Beef production and supply has decreased and is an

important serious issue affecting the economy. There

are various land disputes that continues to affect the

productivity and agriculture development in those

areas. There is a need for Pacer-plus agreement to be

explored more and expose the country’s agricultural

production to the outside market as well.

In 2018, there is an expected fall in cruise ship

number; 2017 received 180 cruise-ship visits, 2018

with 120 and 2019 has an expected 80 cruise-ships

to Port Vila. So there is need for the government to

support and increase marketing of Vanuatu as a

tourist destination, to boost the economy. From the

point of view of duty free retailers (Prouds Duty Free),

with the increase in options available, more cruise-ship

customers tend to travel around Efate than do duty

free shopping at the shops. There are concerns also

the shortfall in VAT collection could be related to the

fact that import duty from imports for construction

(machines and equipment) are exempted, so with the

high level of infrastructure project in the economy,

there are still less revenue collected.

The current activities in the economy in 2018 is the

building and infrastructure construction industry and

some contribution by RSE workers. Otherwise,

activities in Port Vila is generally steady with few

developments happening around town.

Forward looking

The good infrastructure and roads in place will

support business performance. As new roads to remote

areas are improved, demand for grocery supplying

businesses in remote areas increases, an opportunity

for wholesale and retail sector to increase.

Wholesale and retail currently face difficulty to ship

goods on vessels, since shipping vessels are fully

booked or loaded. This process often wastes a lot of

time and incur high expense of transporting supplies

to wharf if they are not shipped out. It is recommended

that government should look into increasing the

number of vessels servicing the islands that could

address this problem. The freight costs is mostly inter-

island costs related. There is lack of competition in

shipping industry which contributes to the high costs.

Stevedoring fees charges are relatively stable; cost

has come down which are transferred to ships but

hardly to the customers (as much of the cost occurred

by customers is due to lack of competition, bidding up

prices).

There have been an increasing interest by the Chinese

developers and investors that are putting pressure on

development in the country. It is important that the

government needs to manage this well into the future.

2019 is expected to be a quiet year as compared to

2018. With the fall in the number of cruise-ships, it is

expected that, earnings will definitely fall (the

example of a bus-driver transporting cruise-ship

visitors, will encounter a fall in earnings into 2019).

2019 is anticipated to be a difficult year for cruise-

ship spending; 2020 cruise-ship is expected to

increase to 150 (although not confirmed), but the

cruise-ship industry is expected to rebound. As

Vanuatu continues to grow and develop, it is an

important to educate people about a new mind-set on

keeping Vila town clean as there is need for more

enforcement keep the town clean.

Seasonally, the Christmas season is usually a high

spending month, or increased sales; outlook for 2018

is expected to be steady compared to the same

period of 2017. There is good optimistic views for

2019 when the infrastructure projects are expected to

be completed; extension of the international airport

completed and air flights increased. Things will

improve further towards 2020, but it will depend

highly on the 2020 election, any further future plans

by Government for introducing the income tax, and

whether new investors are buying new land, etc. as

part of investment.

The outlook for 2020 is uncertain; it is an election year,

so it is highly dependent on the outcome of the

election; there remains potential impact of cyclones

occurring; and the government work on new policies


15

such as the VAT or the income tax. The uncertainty

around plans of income tax will have impact on

expatriates who are expected to leave. The

unforeseen prediction about income tax is hurting

businesses and creates lots of uncertainty – the

government should be clear and transparent about the

development of this new tax and need to transparent

and advise in advance in order to minimize the effect

on businesses.

Future plans is positive, business view improvement.

With the current changes in the country, the business

and other business should continue to grow and keep

up with change. The positive progress for some well-

performing business spells a positive outlook for the

future and one or two major businesses have plans of

diversifying to other sectors such as hotels (tourism) if

the current performance progresses well. The economy

should continue to focus on Tourism – the main driver

of economic activity – efforts and commitments should

be growing and developing the tourism sector as its

spillover effects will benefits the rest of the economy,

as well as to individuals and businesses.

Industry

Manufacturing

Manufacturing sector performance in 2018 – For a

while, there have been tough financial situation in the

economy due to severe cash-flow challenges in town

as a whole (view from Azure Pure Water Ltd). And

there is surplus capital in the commercial banks (high

liquidity), however banks are conservative to lend to

the market at the moment. All these are stifling

economic growth, and the lack of economic stimulation

and the challenge of imported cash and labour is

contributing to funds/earnings moving offshores.

The employment market from the manufacturing

industry point of view has been quite hard/difficult,

there have been 5-6 new written applications per

week, looking for work indicating the high level of

interest in the market which is good, however ni-

Vanuatu job seekers cannot find job.

For specific businesses such as Azure Pure Water Ltd,

the business has seen a month-on-month growth in sales

and turnover has increased over the last year. The

business has also secured contract to supply to P&O

carnival for the next 3 years and expected a

projected increase of 10 percent in sales. Although the

business outlook is pessimistic, the turnover figures are

optimistic.

Access to capital is still a concerning issue for the rural

local population. There is viable funding and suitable

sized funding but with very minimum access to climate

change or the IMF funds – these funds are too large

that the rural and local SMEs are not able to access

this large amount – there is nothing in between to

support small businesses (such as micro funding). There

is need to support small and micro businesses, and

enterprises such as mamas and Lapita Café are

proved successes. Opportunities for SMEs should be

made widely accessible through access to finance –

currently, only a few, such as NBV are working hard

on this and supporting financial literacy, while there

remains in general the lack of access to finance from

other potential funds/organizations.

For other manufacturing and exporting business,

performance has improved with turnover increasing

over the year (Cellovila Ltd). Seasonally, January-

March is usually quiet, but in 2018, sales have picked

up. The turnover for the month of September 2018 is

the same as peak month of December 2017. The

business’s export to New Caledonia rose in 2017

contributing to increased productivity from the factory.

The business has stepped up more work on wholesale

and retail in 2018, and turnover has increased. It is

recommended that the government should put more

emphasis on increasing import duties on imports of

similar products imported from overseas, in order to

support the local export industry.

Business operations - The majority of the business

viewed there is potential to supply the local economy.

The impact of the MSG agreement show that there are

no duty charged on the imported rolls into the country;

so the increased imports of products affects the local

manufacturing businesses who are struggling to

survive.

The economy’s future is unpredictable at the

moment as most ni-Vanuatu are not getting

employment. The chamber of commerce has concerns

that foreign labour is filling up ni-Vanuatu posts. The


16

increase in VAT affect business contributing to general

price increase.

Manufacturing industries that rely entirely on the

domestic supply of raw materials are affected by

natural disasters and takes time to rebuild supply and

bringing their product to standard quality. For

example, ACTIV Association, Chocolate depends on

cocoa quality – a requirement for the market. The

Association worked on building a facility in 2013 and

not able to open before TC Pam. As a result of the

cyclone, the business halt operation for 1 year as a

result of damaged cocoa. From June 2016, cocoa

production recovered (April – June 2016). From 2018,

the facility is now in full operation supplying the local

market and focusing on improving quality. Due to the

increasing cost of production, the association has been

progressively exporting and focused on securing

active export markets.

Outlook for growth in 2018 – Generally, businesses

do not agree with the IMF/World economic growth

forecast of 3-4 percent; if aid project was removed,

there is likely negative growth and growth could well

be flat or negative.

Overall, the view of the economy on the short-term is

pessimistic.

The government should target projects on local

development – money spend outside the country (e.g.

imports) are not contributing to the economy.

In the medium-term, the completion of the international

airport extension will supply resorts and hotels with

tourists/visitors. The outlook for the potential

(proposed) new development of the Royal Caribbean

Project on Lelepa Island due to be completed by mid-

2020 is expected to bring positive returns for

businesses such as Azure Pure Water. Otherwise,

businesses sees minimal reinvestment until there is

generally a good confidence and assured future

growth. Vanuatu Investment Promotion Authority

(VIPA) may need to make a priority in stimulating

investors to invest between the short-term and long-

term. Government policies have been consulted with

the public but some are not receptive, as there is not

enough consultation that covers the downside effects

(not only the positive effects), that could potentially

impact the economy.

Since April 2018, Azure Pure Water Ltd has been

supplying to 2 cruise-ships – Pacific Jewel and Pacific

Dawn – and the outcome has been positive. The

business exports 3-6, 124 feet container, per month.

In value-wise, this product is one of the top export of

the country. The demand is expected to increase with

the expected 70 ships expected, following the Royal

Caribbean project on Lelepa Island. This project is

expected to be completed by March 2019 and will

see the set-up of a day-visitor resort on a lease land

(Lelepa) by the cruise-line. This will increase cruise-ship

employment and boost opportunities for outer island/

Lelepa as well as Vila and is a revenue stream for

industries and food companies.

The raw material industry greatly supports the local

economy. It is important to address the challenges and

giving confidence to the investment will get customer

confidence. It also requires increased expertise of

staff to work in the industry. So it is very important to

build up the skill set of workers in the industry – so they

can stay in the job and train others. Therefore,

employment investment in industry is equally

important.

The MSG agreement falls around the all notion of

“Feed Fijian product, eat Fiji product”; Vanuatu should

take the same concept and apply for Vanuatu.

Vanuatu still imports from overseas, but the local

industries such as Fiberglass Vanuatu still struggles. It

would be appropriate to place import duty on specific

import goods, that local industry is already good at

producing. Local industry should be protected because

it is source of local employment. It is also important to

produce and export locally since the local population

pay inside the country and money goes back to the

country; and exporting overseas also brings money to

the economy.

Generally, economy-wise, there are new Asian

investment. The Asians are building new resorts – MG

Resort has bought Cocomo Resort and building the

new MG Hotel development next to Tana Russet.

There has been an increase in Asian (Chinese) investors

in the country, majority investing on retail shops.

The government should support the value-added

activities and such progress have been successful for


17

specific associations. ACTIV association acts as a trade

facilitator with farmers from different island

supporting productivity for other products as well –

Aelan products, spices, kava, etc. The association

focuses on value-addition and since 2013, Aelan

Chocolate started with export trials to Australia and

plans to move into the Asian market.

Forward looking

From mid-term to long-term, the economy is improving.

However, it is imperative that good regulatory

policies needs to be in-place to prevent financial crisis,

strengthen finance and economic management and

project plans are carried out as scheduled.

There are mixed views, but there is potential for the

industry sector to develop and explored. Tourism

should be the first prioritized, Agriculture and

Aquaculture should be second. It is essential to

develop industries in Vanuatu and up-skill workers.

There is need for more focus on agriculture and

aquaculture. Opportunities should be given for ni-

Vanuatu to do this – increase local employment and

keep money flowing in Vanuatu.

Department of Trades should increase and impose

proper standard of local production in Vanuatu and

maximize on opportunities to progress to the next

international standard. In doing so, Vanuatu can

provide products for the international market. These

can be supported through access to finance through

financial authorities that can be made more efficiently

available for the local industry. Third party finance

for construction and healthcare funding was successful

for Singapore, so it can be successful for Vanuatu as

well. There is potential for setting up Tourism and Food

Hubs in Vanuatu. Overall, a holistic approach at an

appropriate scale in addressing these issues is

essential.

2019 outlook on business performance is expected to

be the same as 2018. The industry businesses are

optimistic about 2019 year; the business focuses on

best performance and raising the standard and

quality of its products. The government should consider

introduction of Price Control Unit, improving

enforcement on businesses who set high margin prices

in order to protect the small end consumers from

increased prices.

Local industries should follow the example of leading

industries and try to market in niche market and

concentrate on high quality product, and meeting the

high price in the market. For ACTIV, the focus has

shifted to Australia, and New Caledonia market. Now

the association is slowly moving into the Asian market,

focusing on China and Japan. The current focus for the

business is the Asian market, such as taking part in the

Asia Shanghai Expo in March 2019. Current projects

focuses on training of farmers from Epi, Malekula,

Santo and Aore.

One forward project that is likely to extend to 2019

is the rehabilitation of cocoa plantation (VRTC). By

genetic mapping, by promoting genetics of each

island by working on the variety through cocoa

nurseries for each island. Once this is done, seedlings

can be sent to those island and support is provided to

farmers to grow these. This work was done by an

Australian research team from May – September

2018, and results should be out by March 2019

showing which genetics grows best in each islands, so

farmers can focus on growing. The other project also

includes agro-forestry – which are all good for climate

change adaption and whose outcome will result in

further funding support from EDF11.

The spice market is doing well than production,

however, domestic market demand still increases on

shortage of supply. ACTIV provides local trainers on

growing spices with local sales to shops and retails;

these are all community produced products that

supports and contributes back to the community.

Overall, there is positive outlook for the industries

sector, despite challenges remains.

Hardware Retail

Hardware retail performance in 2018 – Post-TC Pam

years, 2015/2016, the hardware retail business has

been growing as demand for ongoing reconstruction

projects rose. But after 2017, reconstruction projects

have waned down and business supplying building

materials experiences a slow and steady growth. For

2018, projects have been reduced, therefore business

performance have been slow. With the completion of

major public projects, hardware business like Wilco


18

Hardware now focuses on small value projects and

business growth has normalized to its normal trend.

This year, the hardware has focused on tender

projects to supply materials for rebuilding schools in

the outer islands.

Competition in the hardware retail has picked up.

There are more hardware retail compared to previous

years; Mr. Price, Leon Hardware, Pacific Timber and

Hardware Vanuatu (PTH), Vila Distribution (has new

branch just opened in 2018) and Computer World is

also selling electronic appliances. As a result, business

in 2018 has been quiet or slow. Vila distribution Ltd

has opened a new extension, Leon Hardware has

opened from March 2018, with Mr. Price opening

soon.

Since business performance is generally steady, other

hardware businesses may be facing a harder time.

Some business have reduced their number of working

hours while for businesses, it is obvious that business is

not good and hardware stores now open on Sunday

and public holidays, etc accommodating the extra

houses to keep business up.

Hardware Santo branch is growing; the impact of the

evacuation of Ambae communities to Santo has seen

increased demand for building materials for

rebuilding houses for new settlement. There is

potential for business to grow in Santo. For the local

market in Port Vila, most household customers shop

mainly to buy materials for maintenance and not so

much for new projects or house/real estate buildings.

In the solar retail business, there has been increased

competition in the solar power retail in 2018. The

Vanuatu Rural Electrification Program (VREP) program

has been slashing costs. Greentech is not part to of

VREP, so do not receive the 50% subsidy that other 3

competitors have received from VREP. With the

increased competition, businesses like Greentech has

seen a reduction business turnover for 2018 and

currently working on sub-contracts with Unelco

concentrating on extension of power. The business in

2018 was mainly focusing on balancing loss with new

activity through the sub-contract with Unelco.

In the computer and electronic appliances business,

over the last 9 months, business like Computer World

has extended to new fields and increase the range of

products offered for sale. The business focuses mainly

on laptops and computers, but with the decline in sales,

the business has (over the year) ventured into new

products such as speakers, solar and mobile phone

sales in 2018. Every year, the business is getting

better than other competitors and made regular

distributions to outer island customers. The business is

due to open a new Solar Shop near Computer World.

Business operations – There was no change in the

number of employees in the hardware businesses

while other well-performing business have increased

their number. For other businesses, feeling the effect

of competition, the VAT increase effect and reduced

number of workers as a result of closed

branches/outlets in outer islands (those affected by

the Ambae volcano).

In terms of shipping, stevedoring fees have fallen, with

reduced cost of handling containers. Businesses also

faces difficulties with the recent appreciation of the

US Dollar currency making it more expensive to buy

from overseas.

For other business, the increase in minimum wage has

supported sales; there is more money in the economy,

and customers (locals) are able to purchase more

(unlike the previous year, which was quiet). Product

price has increase and sales have gone down.

Outlook for growth in 2018 - Initially business for

2018 is driven by few requests from tourism, schools,

and other islands wholesales customers and few hotels

have been working on maintenance in the year,

indicating the low level of private investment in the

country. One contributing factor for this slowdown is

business are been charged with so many government

fees – inclusive fees at the immigration – such fees has

the potential to stop investors from investing.

Generally, for a few well performing hardware

stores, sales have picked up as a result of increased

wages; but generally a result of diversifying to sales

of other products as part of the business. This includes


19

opening new branch in 2019 and working on new

investment plans.

Forward looking

The outlook for 2019 looks positive; business

performance will remain steady from 2018.

On major hardware business in Port Vila - Wilco

Hardware will be working on its new investment for

2019, a new building extension project called Wilco

Home Centre expected to be completed before

December 2019. Construction have started and will

progress towards the end of 2019. The new Home

Centre will sell TV and white furniture.

The government should also re-consider giving

contracts to Chinese companies that set-up in Vanuatu

in the future as most of these businesses import their

workers (expats) and do not employ local workers.

VIPA should priorities businesses that support increase

in local employment. A majority of existing businesses

have been set up for some time and have worked with

locals. There needs to be enforcement of laws

implementing 4 times a year surveillance of

companies, it is a requirement to ensure that business

companies are paying minimum wage, paying VAT,

etc.

With the future introduction of Income Tax, it is

important to enforce and implement control first - even

now, not all businesses are not paying their tax fairly;

it is only the honest companies are paying. The

implementation of the income tax has risk of stopping

FDI into the country. There need to be improvement in

existing laws in order to implement the 17% proposed

corporate tax. It will impact on workers. Before

implementing the income tax, there is high need to

firstly increase access to education, health and

infrastructure.

It is likely that revenue from passport sales stops – the

country will have to implement an income tax. A

reduction in government revenue will mean that the

government will not able to pay out its loan. Due to

these financial uncertainty, investors will be cautious

and put their money elsewhere. There need to be

more enforcement and control in revenue tax

collection.

Vanuatu should provide more support for FDIs into the

country – providing opportunities for access to finance.

These investors could find elsewhere to make a good

investment, but they have chosen Vanuatu. The outlook

for 2019 is cautious (optimistic), businesses are likely

to hold up their investment plans until things start

improving.

There is potential for tourism to develop further in

Vanuatu. There should be more efforts to increase

tourism in Vanuatu that should boost air visitor arrivals

to the hotels and boost tourism spending in the

economy.

Real Estate

Real estate performance in 2018 - The first half of

2018 is very good, there have been regular sales with

interests from local while the overseas clients

remaining steady (Caillard Kaddour). The rental

market has performed well over the year. Sales of

properties have declined in August 2018, but the

Asian market continue to increase. There have been a

slowdown in the Australian market; could be due to

the slowing Australian economy, the Australian market

is drying up and less demand.

Real estate businesses in particularly Caillard

Kaddour, have plans and expected that some of its

projects were to start in 2018 but these projects have

been delayed; these projects include Port Vila

Harbour project and the White Sands Project due to

kick-start June 2018 has been delayed and expected

to start in 2019.

Real estate business see 2018 as an intermediate

year; 2019 will rebound in economy. The new joint 10

year plan by AVL, VTO and Air Vanuatu will support

tourism going forward. Air Vanuatu has planned for

taking in a bigger aircraft in 2019 and AVL’s progress

on work on the runway and the terminal will see

progress for these plans to eventuate, with further

support by Air Vanuatu and VTO who are currently

working on new tourism marketing and brand. These

new developments could see Air Vanuatu flying to new

routes, Melbourne – this will depend if the new air

craft ER190 is decided by end of 2018; and also

receiving chartered flights from long-haul markets.


20

At the moment, the New Caledonia market business is

slow. Business investors are looking for other potential

investment locations in Vanuatu. They are also still

waiting for outcome of the referendum for New

Caledonia before making a decision, therefore the

market has slowed down.

Perspective view from the real estate businesses shows

that market has been down for the 9 months of the

year. Over the last 2-3 days, the business have seen

some pickup in enquiries on rentals and sales. 2017

was a good year; 2018 has begun to slowdown but

has just pickup. In October, enquiries are coming in.

Interests from the local market has picked up, while

sales and rentals to the Australia, New Zealand, New

Caledonia markets have picked up slowly in Port Vila.

In September-October, a pickup in market demand

for rentals, residential properties and land is faced

with less supply in the market.

Business operations – One or two real estate

businesses increased employment to accommodate for

new business ventures, mostly casual workers to do

property cares and maintenance. Overall,

employment has been steady.

Outlook for growth in 2018 - Real estate business

view growth in 2018 is stable and much slower than

the IMF/World Bank forecast of 3-4 percent; there is

no real growth, but there is expected rebound in

2019. The positive outlook with the expected planned

2nd stage for Port Vila road to start, making the town

looking much better. There is potential for the next

part of the project to follow after phase 1 is

completed.

The Santo market is steady and growing. There is very

good signs for the future of Santo market. With the

extension to the runway completed, Air Vanuatu has

plans to introduce more flights. There are also

prospects that one or two high standard hotels are still

reaching their standard level following their opening

last year, 2017 (Ramada Hotel), and the future for

tourism is quite optimistic with the Air Vanuatu airline

introducing new flights in 2019 that will boost tourist

arrivals.

Forward looking

2019 outlook is positive. There is opportunities for

more charted flights that will put Vanuatu online and

possibly have new interests from new tourism markets.

The outlook ahead for Vanuatu is positive and

optimistic. There is the vision of Vanuatu becoming an

airline hub where New Caledonia clients will travel

through Vila to Asian markets.

Some development projects (under the real estate

companies) are expected to take shape from 2019

after a few delays in 2018. Caillard Kaddour’s two

major projects will take place in 2019. Port Vila

Harbour Centre with building of apartments and

commercial business and the White Sands project

includes building of a hotel, resort and commercial

centre.

2019 and 2020 outlook is good and optimistic with

the completion of the wharf and the international

airport upgrade will support and increase economic

activity. The increase in the direct flights will also help

boost the economy

Transport (land)

Transport (Land) performance in 2018 – For the

rental sector, trading business has been doing well

over the last 6 months, however the cost of doing

business is high and there remain challenges. Up to

June/July 2018, the business has to work hard (twice)

in order to get the same amount of business as last

year. There are not much interest from the cruise-ship

visitor sector as most are transported by tour

operators.

The level of competition is high, as the business focuses

on highest standard service but getting brand new

parts and services properly done. This is compared to

the low cost of other car rentals in Port Vila. There are

issues of not enough qualified workers out in the

market; as per requirement recruitments are based on

bi-lingual compatibility of staff. There is need for

more workers trained to professionalism.

For the vehicles retail business, market demand rose in

2018. There has been increase in vehicle imports;

evident of the increased vehicles imports at the wharf.

The issue with the urban projects and the airport is that


21

these projects are contracted to CCECC which means

a lot of the equipment and trucks are imported from

overseas. Most of these project needs (transport

equipment and vehicles) are not supplied by car

dealers like Intraco.

In 2018, Intraco has supplied vehicles to Tanna Island

and have opened projects in Santo and Tanna. The

projects also include supply of vehicles for the climate

project and locals from the 2018-2019. There are

also prospects that cruise-ships will increase for Tanna

and Santo in 2019 and 2020; therefore, there is

increased interest from the local market for purchase

of transport vehicles. There was also an increase in

auto-repairs and sale of cars have picked up in 2018.

As a result, cash requirements have picked due to the

growing market – but constraint by cash flow issues in

the bank.

Business operations - Cost of getting vehicle parts

and imports are high in Vanuatu compared to other

countries.

In terms of overheads, the business continues to

encounter high cost of electricity. Often with

international transactions with international customers,

it is often difficult to use EFTPOS machines that do not

accept cards from different banks; with expectations

that this will improve in the future. There needs to be

a structure in place to support businesses to get people

to pay rental vehicles – there have been some

improvement, but requires more work.

The standard of workers professional can be

improved through exposure to overseas experience

and professionalism, and ability to speak in bi-lingual

language to serve international customers. And the

importance of educating and training the workforce in

Vanuatu is equally important.

The recent appreciation (stronger) US Dollar – means

that imports are expensive and buying imports with

USD is expensive. This also determines the selling price

of vehicles in the market. On the other hand, the tariff

on import of vehicle is much cheaper but tariff on

cargo is high.

Due to the technicality of the work required and

increased service demand, business like Intraco has

increased employment over the year while others

have kept the same number. There is great demand

for workers with technical skills; these businesses also

provide support through technical training of its

personals overseas.

Outlook for growth in 2018 - The economy in general

has improved a little, but airline airfares are still more

expensive while aircraft flights are not fully booked.

The rental trading business performance has

improved. In terms of sales, there is an increasing

interest from customers in rural areas in outer islands

for buying vehicles – through kava planters and RSE

workers for the purpose making transportation

business and also to transport kava to the main

commercial centers.

Forward looking

Business expectations for 2019 to improve. The current

work has been done with the support from NZ and NC

wholesalers that will continue to provide promotion

following the TokTok event recently held in Port Vila.

With major projects coming to completion, including

the airport project, it is expected that the tourism

sector will improve if the completion of the airport is

expected bring more visitors once completed.

Telecommunication

Telecommunication performance in 2018 - Telecom

Vanuatu Ltd (TVL) has built more towers in 2018, with

coverage extended to most remote areas around

Vanuatu. Some challenges in the year are expensive

equipment due to increased prices and appreciation

of the US Dollar increasing cost of imports.

The trend in landline sales indicates that customers are

moving away to mobile phones usage, households use

more mobiles phones and SMEs businesses use

landlines. The sales have slightly dropped in 2018

compared to 2017. In terms of mobile phone usage,

sales remain steady over the year and is dependent

on its usage. Usage trend dropped especially during

periods when school fees fall due in January –

February and festive event months. It is also evident

that during cruise-ship days, spending increases as

cruise-ship visitors buy sim cards. In terms of


22

investment, TVL have upgraded its investment over the

last 2 years. The amount of investment over the 2

years span is more than the level of investment over

the five years.

Business operation - In 2018-2019, TVL’s

transportation of towers in the islands is expensive, but

the company has been working on this progress, step-

by-step. The company has also faced a lot of land

disputes issues that bring a lot of problems during the

set up and building of towers in the outer islands. This

has become a more frequent issue and land disputes

has stopped development in targeted areas.

TVL has a total of 98 towers. It is also building a few

more on Malekula. Efate is mostly covered while a few

places on Santo is still progressing. The recent

evacuation of Ambae people from Ambae due to the

volcanic eruption on the island, saw all 4 towers on the

islands shut-down and only one is active for

transmission. TVL aims to remove 2 towers there and

move them to other islands.

The number of towers is expected to increase – but

not happening yet; old towers need to shut down first.

The reason behind this is the cost of building the tower

is greater than the return. The high cost is driven by:

1) the high cost of technical service and the local

domestic flight, 2) the high cost of logistics when

accounting for accommodation and per Diem costs.

With the rising cost of establishing those towers which

is entirely due to the geographical location of the

islands, TVL has been working with landowners to use

them as care-takers of the towers and, and providing

payment for their service.

Despite the submarine cable is cheaper, the price for

Vanuatu will be higher compared to Sydney, and

Suva. A reason could be the number of people in

Vanuatu is small, so the cost increase. When package

is high, the cost is also high in Vanuatu. Satellite is more

expensive.

TVL’s latest product mobile-money is a pilot which on

the spot, allows subscribers and shops to make

payments. It will cost a small fee but it will benefit the

remote interior areas of the outer islands. Operations

in 2018 includes work on strengthening the core

system – database and security installation. A lot of

customers are now using 4 G which has more benefits

but the cost is expensive. TVL has also issued its new

phone Directory with TVL numbers.

In terms of employees, TVL has added more

employees with the majority locals and few expats

(part of ADH) and provided internal training. TVL’s

operations includes 1) Land line (85% of market

share); this covers small households, government and

major business corporates. 2) Internet, TVL carries

65% market share as they deployed Fibre before

Digicel Ltd, and 3) mobile, TVL carries 45% of share

which is inclusive of outer island coverage.

Outlook for growth in 2018 - In general, the business

performance is quite steady. There is the view that

there needs to be more enforcement in the economy

to make sure businesses pay their debts and not

allowed to transfer money overseas. There should be

strong restriction of ensuring that these businesses

complete their business loans from banks before

leaving the country.

Forward looking

Looking forward, in 2019, the company is expected

to increase investment as part of building the

connectivity and infrastructure in telecommunication.

Economy-wise, there need to be more local businesses

concentrating on increasing local products. There is big

potential for producing local produced products

rather than depending on imports; money should stay

and circulate in the country. The increasing projects

through loans from China is not good for the economy.

There needs to be a regulation putting strong

restriction on businesses from sending money outside

the country, if they have loans domestically.

The government should consider accepting

grants/aids for hotels, etc. that will generate money

rather than project grants for projects such as stadiums

and other projects that has no revenue-earning

component but add to the external debt of the

government.

The USD fluctuation will affect business operation

increasing the cost of imports.


23

Energy (Fuel Supply)

Energy (Fuel retail) Performance in 2018 - Pacific

Energy has focused in 2017 on creating new supply

chain in the outer islands – Malekula, Tanna – towards

2017 making it affordable with coverage of more

than 40 percent. The distribution of quality fuel

brought support for small service station where risk of

hazard and pollution is limited. In 2018, Pacific

Energy has worked on installing a service station in

Pentecost and is optimistic that it should be ready

before the end of 2018.

The latest development in networks of international

flights in Tanna brought more tourists, there remains a

challenge of storage facility, however, there is also

the need to develop the aviation sector. At the moment

AVL in Tanna is managing themselves and capitalizing

in progress. Continuous land disputes in Malekula

makes it difficult for the location so currently there is

no proper supply to Malekula and there is no AVL

terminal yet. The investment for 2018-2019 has seen

a huge amount of investment covering Tanna and

Pentecost, with plans to increase investment in the

outer islands in 2019. Pacific Energy has made huge

and strong investment over the last 3 years indicating

its strong commitment of providing service to the

community.

The government need to promote more fishing,

infrastructure and economic activity, which intend will

facilitate good VAT collections. This also includes

pushing up compliances and requirements for business

license that will bring up standard of activities – so

sufficient revenue can be collected per year per

island. Following Pacific Energy’s operations in the

outer islands, the lower cost of fuel means people in

the outer islands can have a reduction in their fuel

spending and can spend more on education and

welfare.

For Port Vila, Pacific Energy is gathering for the

extension work at the airport. There will be more

investment on the terminal at the airport, and using

local contractors to work on these projects. The

business spend more on maintenance – tanks and

vehicles – using local subcontractors – which gives them

opportunity to work on these projects.

Business operations – There is a steady increase in

international fuel prices and expected higher prices in

the future that will be passed on to customers. In

additional, the impact of the appreciated (stronger)

US Dollar, has impact a lot on imported fuel purchases.

If the impact of increased fuel prices and appreciated

US Dollar is considered, the 3-4 percent projected

GDP growth by World Bank/IMF might need to be

reviewed downwards. OPEC price have increased, so

there is certainty of higher price for fuel into the

future. With the increase in demand in the world

market, price will increase in the world economy.

For Vanuatu, the fuel price is low – recent increase has

no effect or taxi fares have increased due

readjustment of consumption. Inflation is stronger in

Efate with the increase in VAT, minimum wage

increase; with these developments in 2018, employee

contracts have been reviewed. The increased costs

makes the local currency weaker as inflation has

increased.

The operation for 2018 includes recruitment of one

person per year (on temporary contract). The business

is concentrating on building operational capacity in

Port Vila to 90 percent and providing support for

local operators in Tanna, Malekula and rural areas.

The business has been focusing on providing a service

and taking on the cost of investment, and as a result,

fuel prices are quite stable in the outer islands,

however this may change in the future due to

increasing costs and other constraining issues.

Outlook for growth in 2018 - Business outlook, in

general, is quiet for 2018. At this stage, businesses in

general are still yet to see the benefit of infrastructure

work completed – from then, the economy can grow.

2018 is a transition year, economy will re-start in

2019. There is hope that the following activities

driving growth will pick up again and there should be

incentives and support for them to do so: industrial –

more projects and tourism pickup and it is expected

that by 2028, the aviation sector will recover its

investment made to the airport. In May 2019, Air

Vanuatu is expected to buy a new plane, even though

an ATR72 aircraft is down, which may support tourism

arrivals.


24

Businesses in the economy are currently investing on

building their capacity, so currently activities is slow.

Some projects have been post-pone, such as the inter-

island shipping. There have been little growth in the

aviation market – particularly air Vanuatu could

experience growth to the end of the year. The current

slowdown in 2018 would need restart otherwise it will

be difficult for businesses in general.

Forward looking

2019 plans includes the set-up of a new service station

on Ambrym. Currently the extension of services for

Malekula and Tanna will include increase coverage of

remote rural areas.

Uncertainty surrounding the implementation of the

income tax, the growth of the economy and inflations

are issues that continue to affect business future plans

of investment. The commercial and industrial

companies are seeing a slower year in 2018

compared to 2017, growth is only driven by projects

but activities in the economy is slow. In 2019, after the

completion of the airport, the aviation sector will take

time to build capacity first before businesses plan

investment will start to pick up. It is likely it will take 3

years ahead before the country will start to see real

growth and development.

Airline Industry

Airline performance in 2018 – the year, 2018 is a

good air for air transport, better than 2017. For

airline businesses such as Air Calin, the office in

Noumea has planned for extra flight in 2019

beginning January – increasing to 3 flights per week

to cover for the school holiday. The impact of the more

frequent flights has seen more tourists in Port Vila. Air

visitor travelers on Air Calin travel from Europe and

France while 80 percent are mostly New Caledonia.

For the operations, there have not been any changes

in employment. Overhead costs includes high telecom

costs although electricity costs have stabilized.

Forward looking

The next 6 months and outlook looks good with airline

forward bookings increasing.

Beef Industry

Beef industry in 2018 - Beef production has declined

in 2018. The cattle for local and export market has

declined tremendously. The abattoir concentrate more

on selling to the local butchers in the year. So far in

2018, VAL Pacific has exported only 3 containers to

overseas market (Solomon Is and Papua New Guinea),

a drop from the previous year.

The main issue surrounding the cattle/beef industry is

the shortage of supply and farmers are not supplying

enough on Efate Island despite shipment from Santo.

The shortage of cattle supply will be a long-term issue

for Vanuatu and there is a need for the government

to ramp up supply of cattle in the islands and Efate.

Prices have increased in 2018 due to VAT, prices were

lifted about 19 months ago. The abattoir has weekly

supply to resorts but not enough to supply the strong

increasing demand from the local market. The main

client base of the business is mainly resorts, super-

market and exports. In terms of employment, the

number of workers have dropped, but not yet

replaced. The Abattoir has reduced the number of

workers, all a result in the slowdown in business.

Forward looking

There is a need for more work to be done in helping

farmers to re-stock the cattle farms. The government is

embarking on cattle re-stocking projects in the outer

islands but it will take some time (2-3 years ahead)

for supply and beef industry to pick up again.

New land law act that will put restrictions on turning

rural agricultural lease into a residential lease will

help support the cattle development projects into the

future.

IV. SECTOR DEVELOPMENT – SANTO

Introduction

Santo is the largest island in Vanuatu with a

papulation of more than 40,000. Luganville, which is

the second biggest town in Vanuatu is located on

Santo. It is where most business activities in the

northern part of the country are concentrated.

Luganville has a population of around 13,156,


25

accounting for 23 percent of urban total population

of 57,195 according to the 2009 Population Census.

The rural population from not only Santo, also but

Penama Province and Malampa Province, come to

Santo (mainly Luganville) to sell Copra, Cocoa and

Kava and to do shopping (wholesale and retail

shoppers) in Luganville.

Luganville has the main export port of Vanuatu

because the northern part of Vanuatu is endowed with

agriculture production, mainly Kava, Copra and

Cocoa productions. Exports from Luganville usually

accounts for more than 60 percent of total annual

exports. In 2017, in terms of value, it accounted for

70.2 percent of total Vanuatu exports.

In terms of tourism, Luganville visitor arrivals on air

usually accounts for more than 3 percent of total

visitors arrivals into Vanuatu. In 2017, total air visitors

to Luganville accounted for 5.2 percent of total air

arrivals into the country. Additional to that many

tourists transit from Port Vila international airport and

travel up to Luganville for holiday and other purposes.

Moreover, day visitors to Luganville and Champaign

Beach in Santo received on average 2 cruise ships

each month.

The businesses and the authorities visited were Acting

Secretary General, Sanma Tourism Office, Beach

Front, VCCE, John Fordam (Kava Factory), Vanuatu

Hardware (Simeon Aru), Hotel Santo, ANZ, BRED,

VCMB, LSC (Ambae Supplier), Melcoffee Sawmill,

COPSL (Factory and Shipping), WSS (Factory,

Abattoir, Hotel, Real-estate, farming, hardware and

retail) and NDMO.

Agriculture Sector

The overall business sentiment confirmed by

Agriculture Department in Luganville, commodity

regulators and the copra, cocoa and Kava buyers in

Luganville points to a fairly stable growth in

agriculture production in the northern region. The

stable growth is the result of a mix growth in sub-

sectors of the agriculture industry.

Copra production according to copra buyers have

dropped significantly in the northern part of Vanuatu.

This is attributed mainly to the drop in copra price in

the world market. Copra price in the domestic market,

as a result of that, have dropped to as low as

VT25,000 per ton in Luganville. This means that the

beach price for Penama (Ambae, Pentecost, Maewo)

and Malampa (Malekula, Ambrym, Paama) must be

lower. Reports confirmed that in some of those outer

islands, price went as low as VT15,000 per ton. This is

discouraging to copra farmers hence the reported

drop in copra production. It is also reported that one

other major contribution to the drop in copra

production this year is due to the Volcanic Eruption on

Ambae, which caused widespread devastation and

total evacuation of the islands. Reports from

commodity regulators office confirms that, in volume,

usually Ambae produces 5.0 percent of total annual

copra production in Vanuatu. This 5.0 percent of copra

production will be lost due to the volcanic disaster on

that island.

Likewise, cocoa production has also seen slight

decrease in production in Luganville. The drop is

largely due to the Ambae Volcanic disaster and the

cyclones that stroke the northern region of Vanuatu

early this year. Another major reason for the decline

is the unstable price on the world market. World price

for cocoa currently remained high but lower than

levels seen in the previous months and years. It is

currently on a declining trend.

Kava production in Santo as confirmed by Agriculture

Department in Santo as well as kava buyers and kava

exporters, has been increasing over the year. This they

said would be the offset of the fall in copra and cocoa

industry. Kava production has dramatically increased.

However, most of the production is consumed

domestically while only a small portion is being

exported. Kava exporters has confirmed this but are

optimistic about the future as they are seeing an

increasing trend in kava planting. They said the next

4 to 5 years’ time, there will be a good supply of

Kava from Santo. In the meantime, their export of

Kava keeps increasing in line with the local production.

Forestry and fishing industry in Santo will remain

stable for 2018 compared to 2017. Reports from saw

millers and timber shops confirmed this trend during

the survey and remain optimistic about 2019 for this

industry. There are some tentative reports of joint

venturing with local and foreign companies that will


26

see a boom in the industry but it is yet too early to

confirm.

Similarly, the animal production industry in Santo has

been confirmed to have slightly dropped in 2018

compared to 2017. The survey team has visited major

cattle farms as well as the abattoirs in Luganville and

confirmed that most cattle slaughter are consumed

locally. The abattoir firms were saying that cattle is

becoming more and more difficult to find and that

source from local farmers is collapsing. The feeling is

that they are currently farming and in the years to

come there will be a rebound in cattle production.

Agriculture Sector/Fisheries

Cash

crop/Livestock/Fish

Sentiments Remarks

Copra Negative Low price,

Cocoa Positive Association

Active

Kava Positive Association

Active

Peanuts Positive Supply to Port

Vila market

Fresh Fish Positive Luganville Fish

market was

opened

Industry Sector

Overall, the industry sector in Santo, according to

reports during the survey, confirmed a stable growth

in 2018.

The survey team consulted hardware shops as well as

constructions companies and visited some major

construction sites. The feeling is that construction is

stable in Luganville mainly attributing to private

constructions and private investments while public

infrastructure projects slows down. Sanma provincial

government also confirmed the story with mention of

few major hotels been constructed in 2018 in the

Sanma province.

Moreover, the manufacturing sector in Luganville has

indicated a slowing down in production. This is

confirmed by the Santo Oil Mill Production which is the

only oil producing company in Vanuatu that export

coconut oil. They have confirmed a reduction in coconut

oil production and have attributed it to a slowdown in

copra production due to the current low price of

copra.

Industry Sector

Product Sentiments Remarks

Coconut Oil Negative Low price, COPSL

Coconut Oil Factory

running down

Services Sector

The services sector in Luganville remain somewhat

stable in 2018 compared to 2017. This sentiment is

common in almost all sub-sectors of the Service Sector.

Reports from tourism vendors confirmed to a slight

increase in tourism activities on Santo. This is in line with

the introduction of new direct flights from Australia to

Luganville this year. Hotels have indicated that 2018

should be a bit a better year for tourism industry in

Luganville.

On the other hand, day visitors to Luganville have

been very weak in 2018. The expectation as

confirmed through survey in Santo is for a total of 12

visits in 2018 but so far only 3 ships have arrived in

the period of January to October 2018. The

Authorities stated that this is discouraging as cruise

visitors play a very important role because they spent

direct to the hands of locals. The authorities have

confirmed the launching of some new day products in

Luganville and are appealing to the government and

stake holders to make effort for more ships to visit

Santo in the coming years.

The sentiment for the transport services sector in

Luganville is stable. There is an offset as shipping

services seems to be affected while land transport is

performing on a positive note. The shipping service

industry in the north is affected due to weather

conditions, Ambae volcano disaster, and the current

low price of Copra. The normal service to Ambae is

now fully stopped and that is loss of business for them.

But on the other hand, land transport is seemingly

performing exceptionally well. Despite the fall in

copra price, reports confirmed that the relocation of

more than 6000 people from Ambae to Santo have

some positive impact on land transport in Luganville.


27

Retail trade and whole sale trade in Luganville has

reported a slight improvement in business compared

to 2017. This they said is due to in part to the good

performance in the kava industry, the RSE workers

programs as well as the Ambae disaster. The

relocation of the people of Ambae to Santo has a

positive impact on major whole sale and retail stores

in Luganville. Major shops consulted reported an

increase in sales as well as an expectation of some

profit higher than what they made last year.

Financial services and every other sub-sector of the

Services sector in Luganville seemed to remain fairly

stable compared to 2017. The financial services

providers seem to be on a positive note when

interviewed and reported some increases in the

number of deposits, their loan portfolios as well as

extended services through ATMs and other electronic

products for customer services. The same can be said

for real estate industry, government services as well

as education, health and recreation.

Services Sector

Services Sentiments Remarks

Trade Negative Drop in copra and

cocoa exports, no more

cargoes supply to

Ambae.

Tourism positive

Transport

(shipping

services,

particularly)

Negative Low copra price;

COPSL got rid of two

ships MV Havutu and

MV Aurora

Financial

Service

Positive Slow improvement

after AFIC has closed

down. However, there

are still some signs of

loss of trust in Financial

Services for most

members of AFIC.

Prices

Prices Sentiments Remarks

Consumer

prices

Negative Increase in prices

Electricity

price

Negative Increase in electricity

price from

36.29VT/kWh to

38.52kWh as

recovery costs to

2016 loss

Copra prices Negative Prices have dropped

even as far as

18VT/Kg

Cocoa prices Negative Prices increased from

119VT/kg in Q1

2017 to 192VT/kg in

Q2 2018, however

the harvest was low

due to Hola’s impact.

Operation Cost

According to the businesses, the operation costs has

increased due to higher electricity rate. Costs have

increased due reduction in the number of vessels for

interisland shipping freight. For example, WSS uses its

own generator to manufacture 200 litre fuel

cylinder/drum, still the price of its poultry and beef

cans are not competitive compare to Fiji and PNG

corn-Beef. The minimum wage increase has

contributed to the high production costs.

V. SECTOR DEVELOPMENT - MALEKULA

Malekula is the second biggest island in Vanuatu and

a major producer of copra and cocoa, producing

approximately 45 percent of annual national copra

production and approximately 62 percent of national

cocoa production. Malekula has a large kava

production potential and is reportedly has a vast

untapped area of production that is yet to be reached

due to inaccessibility.

The businesses and the authorities visited were Acting

Secretary General of Malampa, Malampa Tourism

Office, LCC, Vanwoods, Vanuatu Cocoa Premium Ltd

(VCPL), NBV branch


28

Agriculture Sector

Overall, the agriculture sector in Malekula has

significantly dropped in 2018 compared to 2017. This

is confirmed during the sentiment survey in Malekula

by almost all companies and firms that the survey

team visited. The major contributing factor to the drop

that was cited was the low copra price and the

devastation caused by cyclone Pam in the year 2015

as well as recent Cyclone Hola during the start of

2018.

Even though copra buyers and copra exporters in

Malekula reported some activity, the level was lower

compared to last year and the year before. The

current activity is because of improved coverage in

which companies continue to provide transport to

farmer’s doorstep to purchase their copra produce.

Similarly, sentiment expressed by cocoa farmers, and

cocoa buyers’ points to a significant slowdown in

production. Like in the copra industry, cocoa is

affected by cyclone Pam in 2015 and then again in

early 2018 when Cyclone Hola strikes Vanuatu and

hit mainly Malekula. The Malekula economy suffered

the worse reduction in Copra and Cocoa industry in its

history. One of the biggest cocoa plantation in not

only Malekula but Vanuatu confirmed around 70

percent of its total production was affected by

Cyclone Hola.

Agriculture Sector/Fisheries

Cash

crop/Lives

tock/Fish

Sentiments Remarks

Copra Negative Low price, and damage

of trees

Cocoa Negative Damage of trees in

Metenesel plantations

by TC Hola

Kava Positive With low copra price

and poor cocoa harvest,

people are switching to

Kava, which has

increasing price.

Fresh

fruits,

vegetable

Positive Production is recovering

gradually, but without

the farmers’ normal

s and root

crops

earning from copra and

cocoa proceeds,

purchase is limited to the

few salary workers.

Kava production in Malekula is somewhat positive but

on a slower pace. This was the sentiment expressed

and the outlook is for supply to increase in the next

few years. A concern is that farmers are now planting

so much kava that are not concentrating on food crops.

Forestry and Fishing activities on the other hand seem

to remain calm and stable in 2018 compared to 2017.

Logging activities in Malekula still produces fairly

stable and the dishing industry remains. A concern

shared during the survey is that farmers and fishermen

tend to be more into the RSE work than making a living

through resources they have at home.

Industry Sector

The industry sector in Malekula has improved

compared to last year. This is the sentiment collected

from public works department, manufacturing industry

as well as hardware shops in Malekula.

Construction has boomed in 2018 compared to 2017

and that is heavily due to the continuation of the

CCECC road construction on Malekula Island. The 15

kilometers of tar sealed road was completed in 2018.

Two other factor would be the continuation of the

Road for Development (R4D) that is still going on

around Malekula, Ambrym and Paama as well as new

road construction that is trying to connect to South

West Malekula.

Reports collected from hardware shops in Malekula

also confirmed an increase in construction activity on

the islands. Sales have significantly increase and is

attributed to public road construction as well as

private home construction. It was mentioned that the

RSE Scheme has positive spilt-over effect on

constructions in Malekula. Hard ware shops are

expecting some profits higher compared to last year.

There are more than two hardware shops in Malekula.


29

Industry Sector


Manufacturing

of timber

Positive Timber yard to be

established

Processing of

cocoa bean

Positive This is a premium

product, for the

processing of

chocolate blocks in

Luganville

Construction:

infrastructure

Positive Tar sealing of the

road from Norsup

Hospital to lits-lits

Services Sector

The services sector of the Malekula economic has been

confirmed to be stable so far in 2018, with prospect

of a slight increase, when compared to 2017.

According to the Tourism Department in Malekula,

2018 should be a better year than 2017 for the

tourism industry. It was confirmed that tourists mostly

travels in groups of more than 10 people to Malekula

and stays for more than 10 nights in Malekula. They

are mostly long-hauls tourists who visited Malekula for

a custom experience as well as the Ambrym Volcano.

It was noted that a slight increase in the number of

tourism products have been noted for Malekula and

Malampa province. However, the challenge is the

flight seats available to Malampa as well as the

continuous cancelation of flight schedules by Air

Vanuatu. The Malampa Provincial Government is

working to improve the airport runway to gather for

ATR flights and build a new Airport Terminal to

address the issue.

Retail and Wholesale Trade in Malekula has seen an

improvement compared to last year. Reports

confirmed that even though cocoa and copra

production is affected by cyclone, people are moving

to other source of revenue like Kava and the Regional

Seasonal Employment scheme (RSE). Retail and

Wholesale shops in Malekula have confirmed sales in

2018 should be higher than 2017 and that profit will

be higher. This is in line with higher sales recorded so

far and a general view that operation costs have been

stable over the year.

Finance and insurance services sector of the Malekula

economy is somewhat stable compared to last year

but with signs that a slight improvement will be noted

by the end of the year. This sentiment is expressed by

Banks and Financial service providers in Malekula.

They share a view that public trust in Malekula may

have been affected by a Saving and Loan Society

(SLS) which has recently been run-down due to

management problem. The SLS has been actively

operating previously as a commercial bank in

Malekula.

Public administration services, Real Estate Services,

transport services, telecommunication services and

other services in seemed to have been stable in 2018

compared to 2017. Consultation with transport

provides and other entity in those respective sectors

have all confirmed to this trend.

Service Sector


Trade Negative This is related to the fall

in coconut industry, fall in

price, and the fall in

cocoa production. Non-

SSP stations closed, few

prominent wholesale and

retail shops were running

down.

Trading

of fuel

Positive Reduction of fuel prices

to Port Vila fuel price

level.

Tourism Positive Better than past years

Transport No

change

Low fuel price and tar

seal road

Financial

Service:

Vanwoods

and NBV

branch

No

change

However positive signs,

after AFIC has closed

down, still most AFIC

members may have lost

trust in Financial services.

Prices

The increase of prices are automatically transferred

to customer as the proportion of the retailers’ mark-

up is kept constant.


30


Consumer

prices

Negative This is related to the

price fall in coconut

industry, and the fall in

cocoa production

Fuel Positive Reduction price to Port

Vila price.

Copra

prices

Negative Copra price dropped

to 18VT/Kg

Cocoa

prices

Negative Cocoa price dropped

to from 147VT/kg to

127VT/kg

Operation Cost

The trend in operation costs is most likely to follow

the trend for the shipping freight which have the

tendency to be high, to compensate for loss in

forgone freight from copra and cargoes freights due

to lower volume of copra, cocoa and cargoes

transshipped.

VI. SECTOR DEVLOPMENT – TANNA

Introduction

Tanna is the biggest island in Tafea province and has a population of more than 29, 000 people, making it the most populated island in Tafea province.

It is one of the most attractive islands in Vanuatu given

the active Yasur volcano, and the international airport

in Tanna makes it one of the main tourist destinations

in the country. It is also well-known for its unique Tanna

Coffee that is 100 percent produced by local farmers.

Tanna is also one of the main suppliers of root crop

such as Yam, Taro, Sweet Potatoes and Kava.

Tanna Island hosts one of the major tourist attraction

sites in Vanuatu, active Yasur Volcano. Situated in the

south of Vanuatu, Tafea Province has a total

population of approximately 32,540 people (2009

National Census), accounting for 14 percent of the

total population. Tafea Province received

approximately 7,628 visitors in 2016. Tanna Island

received 6,963 visitors in 2016, a 26 percent increase

over the 2015 year level.

Tanna’s Whitegrass Airport will receive an upgrade

after a contract award for Lot 2 of the Vanuatu

Aviation Investment Project (VAIP) was signed on 22nd

May 2017 between the Vanuatu Government and the

China Civil Engineering Construction Company

(CCECC) and its joint-venture company Northwest Civil

Aviation Airport Construction Company (NCAACC)

China. This Lot 2 award will increase the lifespan of

the airport runway by 10 years. The contract (which

includes the Pekoa Airport upgrade on Santo) valued

at US$11,390,000 (VT1.3 billion) was expected to be

completed by 240 days. Apart from over 6,000

tourist visitors that visit Tanna Island, approximately

43,000 passengers utilize the Whitegrass Airport.

Among others, the survey team visited Tanna Provincial Government (Project Officer), Department of Cooperatives, Department of Forestry, Fishing & Livestock, Public Works Department, National Bank of Vanuatu, JK Naulas Store, Jen Store, Bill Yapsen Enterprise, Rocky Ridge Bungalows, Evergreen, Rock Water Resot and White Grass Resort. Agriculture Sector

The Agriculture Sector of the Tanna economy has seen

a slight increase in production compared to 2017.

Reports confirmed that after the cyclone hit Tanna in

2015, restoration projects mainly targeting the

agriculture sector has been effective and agriculture

production has normalized. Prices of mainly

vegetables, root crops such as Yams, Kumala, and

Taro, at the local market is now back to normal, with

seasonal high supplies that tend to reduce prices.

As it was reported in the 2015 Business Sentiment

Survey Report, the Kava industry in Tanna will need

more time before harvest is normal. After the 2015

cyclone, replanting of Kava plantations by farmers is

done but the harvest is yet to be made. The kava

industry in Tanna is still down, but slowly picking up.

Fishing and forestry on the island of Tanna and Tafea

is generally down. Reports confirmed that these two

industry seem to lack investments by local. The fish

market however is however operating but is supplied

with only canoe fishermen.


31

Industry Sector

The industry sector of the Tanna economy has dropped

after the completion of the stage 1 of the Tanna Road

Tar sealing by CCECC in 2017 but remained at

elevated levels. Reports collected confirmed that

constructions of mainly roads still continues for the R4D

projects as well as cementing of roads and a new tar

sealing is expected on the road to Yasur volcano. This

means that quarrying and other activities that relates

to road construction will continue to remain at same

level over the years.

Services Sector

Tanna tourism industry, from the reports collected, is

improving compared to 2016 and 2017. Hotels and

resorts have pointed to a good year compared to

2017. General costs of doing business in Tanna have

be stable and profits should be positive this year. The

only concern is the intended increase to the entrance

fee for the volcano and the high flight rates from Port

Vila to Tanna operated by Air Vanuatu. Other than

that, bookings are improving as well as occupancy

and average length of stay.

Retail and wholesale trade have seen some

improvements in sales and are pointing to a positive

year compared to 2017. This they said is in line with

the performance of the agriculture sector as well as

the industry sector mainly construction activities in

Tanna.

This trend is further confirmed when the survey team

visited banks and other financial service providers.

BSP bank has established itself on Tanna Island which

makes a total of two commercial banks in Tanna.

Banks reported an increase in their daily holdings

(more than doubled) as a result of increased business

activity on Tanna. Banks confirmed that business

activity on Tanna has normalized and that targets

(lending, deposits etc.) are expected to be surpassed.

VII. SECTOR DEVLOPMENT – EPI

The businesses and the authorities visited were Epi

Agriculture field assistant, the Epi Area Administrator,

one chief and RSE worker, one RSE Senior Manager,

one bungalow owner, one boat operator (Fishing and

transportation), retail shops, and the Epi Oil Mill.

Agriculture Sector

The general sentiment in agriculture sector was

positive, due to the activation of the several farmers

associations, such as kava, coffee, cocoa and onion

associations. In the area of fisheries, there has also

been an establishment of fishermen association.

Though copra industry on the island, has suffered since

the closure of the coconut oil factory, there has been

some development in the manufacturing industry that

will be driver for future growth in copra industry.

Cash

crop/Lives

tock/Fish

Sentiments Remarks

Copra Negative Low price, closing of

Coconut Oil Factory.

However, certification

process of plantations in

progress for production

Organic Coconut Oil for

Exports

Cocoa Positive Association active, but

prices dropped from 190

to 130VT/kg

Kava Positive Association active

Coffee Positive Association sells to Tanna

Coffee

Peanuts Positive Supply to Port Vila market

Potatoes Positive Started

Onion Positive Started

Cattle Positive Regular supply of live

cattle to Vanuatu Abattoir

Fresh Fish Positive Sold to local and

Bungalows,

Fishermen association and

supply booths are

established


32

Industry Sector


Coconut Oil Negative Low price, Closing of

Coconut Oil Factory

The certification of organic coconut plantations has

started on Epi and awareness has expanded onto the

island of Ambrym. The main objective of this project

was to secure the supply for certified organic premium

coconut oil. This will be a premium product for niche

export market, as opposed to the traditional crude

coconut oil. This project was a private sector led

initiative.

Services Sector


Trade No change

Tourism No change Cruise ship call to

Laman Bay on the

day of visit was

cancelled

Transport Negative Low copra price

Financial

Service

Positive Slow improvement

after AFIC was closed

down, still some signs

of loss of trust in

Financial Services for

most members of

AFIC.

The activities transportation and retail trade industries

have been affected by the slowdown in copra

industry.

There was mix sentiments, loss of trust in financial

services after the closure of APMA Financial Investment

Centre (AFIC). However the financial sector has slowly

improved, as the only traditional financial service

provider, the National Bank of Vanuatu, began to

experience crowds again at its premises.

The general sentiment for the respondents in relation

to services sector development was rather stable.

There has not been any improvement in the tourism,

transport and retail industries.

There has been a cruise ship call arranged for Lamanu

Island on the day of business visit. Government

officials and tourism authorities have flown in to

officiate a welcome ceremony for the cruise ship and

its passengers on the Lamanu Island, but then due to

unforeseen circumstances the cruise ship had to cancel

a historical event.


33

VIII. APPENDICES

APPENDIX 1: COPRA PRODUCTION

Copra Production by Province and Island in 2016, 2017 and 2018 (Jan-Sep), in tonne

Province Island 2016 20172018 (January to

September)

Malampa Ambrym 1,795 2,518 1,303

Malekula 11,239 8,114 4,752

Atchin 9 46 3

Tomman 25 1 14

Sub-Total 13,068 10,679 6,072

Penama Ambae 1,628 1,464 495

Maewo 367 558 176

Petecost 107 150 20

Sub-Total 2,102 2,172 691

Sanma Malo 2,826 1,834 2,225

Santo 13,714 13,744 9,206

Sub-Total 16,540 15,578 11,432

Shefa Epi 1 356 172

Sub-Total 1 356 172

Torba Vanualava 2,509 2,243 1,038

Gaua 2 440 191

Motalava 15 46

6

Sub-Total 2,525 2,735 1,229

Grand Total

Volume (in tonne) 34,236 31,520 19,596

Value (in million VT) 1,842 1,915 669

Average Price (in VT/Tonne) 53,799.05 60,739.57 34,128.78


33

APPENDIX 2: COCOA PRODUCTION

Cocoa Production by Province and Island in 2016, 2017 and 2018 (Jan-Sep), in tonne

Province Island 2016 20172018 (January to

September)

Malampa Ambrym 1 1 1

Malekula 442 651 556

Atchin 511 - 2

Tomman 0 0 37

Total 954 651 596

Penama Ambae 49 58 6

Maewo 4 3 2

Petecost 0 0 0

Total 53 61 7

Sanma Malo 29 53 35

Santo 266 134 309

Total 295 187 344

Shefa Epi 7 13 16

Total 7 13 16

Torba Vanualava 0 0 -

Gaua - - -

Motalava - - -

- - -

Total 0 0 -

Grand Total - -

Volume (in tonne) 1,308 913 964

Value (in Million Vatu) 141,562 111,768 157,204

Average Price (in VT/Tonne) 108,187.38 122,389 163,073

VANUATU MACROECONOMIC DEVELOPMENTS AND PROSPECTS October 2018

34

APPENDIX 3: COMPILED BES RESULTS FOR PORT VILA

Overall business sentiment – Port Vila

Majority of respondents viewed general

conditions for doing business have not

changed, while a considerate number

also view general conditions has

improved compared to the previous

year.


35

The majority of respondents view that

inflation or rate of change in consumer

price index has worsened (or increased)

The majority of respondents viewed that

domestic employment has not changed

compared to the previous year. While a

little considerate number viewed that

domestic employment has improved.


interest rates have not changed

compared to the previous year.


average price paid has worsened (or

increased). A little considerate number

viewed that it has not changed



36


total payment for wages and other

operating costs have worsened

(increased) compared to the same

period of last year. A little considerate

number viewed that it has not changed


The majority of the respondents viewed

that prices received for goods and

services have worsened (increased). A

little considerate number viewed that it

has not changed from the previous year


that operating profit has improved

(particularly in the second half of the

year). Similarly most respondents also

view that there has not been any

change, particularly in the first half of

the year, when compared to the

previous year.


that investments in premises, equipment

and fixed assets has not changed

compared to the previous year. A few

has indicated that it has improved.


37

The majority of respondents viewed

total employment to have not changed

compared to the previous year. A

considerate number also indicate that

total employment has improved

(increased).


average weekly hours worked per

employees has not changed compared

to the previous year. Very little

indicated that it has improved

(increased) or worsened (reduced)


debts owed to banks and creditors has

not changed compared to the previous

year. Few indicated that it has

worsened (increased) in the second half

of the year.


that the volume of imports has improved

(increased) compared to the previous

year. A considerate number also viewed

that it has not changed over the year.


38


the capacity utilization has not changed

compared to the previous year, a

considerate number also indicate that it

has improved (increased) and others

worsened (reduced).


inventory level has improved compared

to the previous year. A considerate

number also viewed that it has not

changed compared to the previous

year.


total sales volume has improved

(increased) compared to the previous

year. A considerate number also viewed

that it has not changed and worsened

(reduced).


39

The majority of respondents (specifically

focused on the wholesale and retail

sector) viewed total sales value has

improved compared to the previous

year. A considerate number viewed that

it has not changed compared to the

previous year.

Outlook on Growth for 2018 and 2017


GDP growth for 2017 has improved

compared the previous year, 2016.

A considerate number viewed that it

has not changed compared to the

previous year.


GDP growth for 2018 has improved

in 2018 compared to the previous

year, 2017. (According to views

raised, even though it is an

improvement, the majority see slow

or weak growth in 2018). A

considerate number have also seen

no change.


40

APPENDIX 4: COMPILED BES RESULTS FOR PORT VILA – CLASSIFIED BY SECTOR (SECTOR WITH

SPECIFIC QUESTIONS RELATING TO THEIR TYPE OF BUSINESS)

Tourism


that the average nightly room rate has


year.


the average price of food and

beverage services has worsened

(increased) in particularly the first half

of 2018. A considerate number

viewed prices have not changed in

particularly the second half of 2018.

Few viewed that prices have improved

(reduced).


that total rooms available for sale has


year.


41


that total occupied rooms nights (sales)

have not changed in particularly the

first half of 2018 compared to the

previous year. Also a considerate

number of respondents also viewed

that sales have increased in the second

half of 2018 (could be related to the

peak holiday season and the impact

of the extra flight by air Vanuatu)

The majority of the respondents

viewed that foreign vacation travel

have not changed compared to the

previous year. Also a considerate

number viewed that sales foreign

vacation travel has improved in the

second half of 2018 (due to similar

reasons given above)


the total volume of food and

beverage services have not changed

compared to the previous year. A few

viewed the volume has increased in the

second half of 2018 compared to the

same period of 2017.

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